Private Pensions Series Pension Reform In The Baltic Countries

This publication contains individual country reports, comparative analysis from a regional perspective and examines key policy issues in the private pension sector in the Baltics.

This publication contains individual country reports, comparative analysis from a regional perspective and examines key policy issues in the private pension sector in the Baltics.

For the Baltic countries, pension systems and insurance market developments are an ongoing process. The OECD has been monitoring and analysing these changes in the framework of the Baltic Regional Programme that is administered by the Centre for Co-operation with Non-Members (CCNM). Along with a publication on insurance (see Policy Issues in Insurance no.7 - Insurance in the Baltic Countries), the aim of the OECD project is providing Baltic policy makers and market players with an accurate analysis on their insurance and pension markets, and to assist in their drafting improved regulatory and supervisory frameworks to deal with these matters. The publication contains individual country reports, comparative analysis from a particular regional perspective, and therefore examines the key policy issues in the private pensions and insurance sectors.

Provides a comparative review of developments in old age pensions in the period 1989-2003. Gives projections to 2060.

Despite their increasing fiscal burden, the public pension systems of BRO countries are failing to provide adequate social protection. Although there is a broad consensus about the need for pension reforms, BRO countries are debating whether to embark on systemic reforms or whether to correct the distortions in their pay-as-you-go (PAYG) pension systems. The paper reviews the measures taken by BRO countries during the transition period to address their pension problems and examines the options for further reform. It makes a strong case for a gradual reform approach aimed at establishing a multi-pillar system over the long run, but initially focused on implementation of “high-quality” reforms of the PAYG system.

This paper provides an overview of efforts in the Baltic countries to reform their pension systems, and examines the choices facing these countries in their continued reform efforts. Early reforms were aimed at correcting the flaws of the inherited Soviet system and, in particular, at shoring up the finances of the pension systems and reducing their distortionary impact. The Baltic countries have been in the forefront of transition economies in their pursuit of pension reform. They have taken important steps to shore up the long-run financial health of their existing pension funds and made preparations for the implementation of a three-pillar scheme. Although a move toward a fully funded pension system can potentially make an important contribution to the objectives of pension reform, such a change is neither necessary nor sufficient to meet these goals. The existing PAYG pension system can, at least in theory, be made sustainable by an appropriate adjustment of payroll tax rates and expected lifetime pension benefits, although the average replacement rate implied by such changes may well be fairly low, reflecting the expected demographic developments.