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Impact of changes in multi-pillar pension systems in CEE countries on individual pension wealth*

Published online by Cambridge University Press:  05 December 2016

AGNIESZKA CHŁOŃ-DOMIŃCZAK
AGNIESZKA CHŁOŃ-DOMIŃCZAK*
Affiliation:
Institute of Statistics and Demography, Warsaw School of Economics, Madalinskiego 6/8, Warsaw 02-513, Poland (e-mail: [email protected])
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Abstract

The paper shows the impact of changes in multi-pillar pension systems in six Central and Eastern European countries for individual pension wealth. It demonstrates that the post-crisis changes in pension system reduced pension wealth of workers in Poland and increased in Lithuania and Slovakia. The change did not have significant impact on pension wealth in Estonia and Romania. The magnitude of this effect is highest in those countries where the reduction of the fully-funded pension contribution was permanent. Loss or gain in pension wealth varies with age of participants – it is higher for younger people, who will accumulate their pension wealth to a larger extent after the change. The level of the change in pension wealth depends also on the wage level – higher earners lose more relative to the average wage level. The difference in pension wealth depends also on the difference between rates of return in fully funded and pay-as-you-go (PAYG) components of the pension system. The net outcome of post-crisis pension system modifications depends both on the magnitude of fully-funded contribution reduction, but also on the design of PAYG component and the way individual pension rights are accrued. These results indicate the rise in implicit liability of pension system in Slovakia to be higher than the reduction of the explicit liability caused by the pension system change and the lower rise of implicit liability in Poland and Latvia.

Keywords

H53I38J11J14P36Pension systemspension wealthfinancial crisisCentral and Eastern Europe
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 1 , January 2018 , pp. 110 - 120
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

*

Research in this paper was financed from grant number UMO-2012/05/B/HS4/04206 from the National Science Centre in Poland. I would like to thank Kamila Bielawska and Dariusz Stańko for their co-operation and support during the project work. I am grateful to Robert Palacios and two anonymous reviewers for their comments and suggestions that contributed to improvements of this paper.

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