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Pension reform models in Latin America and Central and Eastern Europe
Stoev, George and Stanchev, Krassen |
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| The paper discusses economic problems in Bulgaria in the 1990s and the question of efficiency of the pension system, advocating a major reform of the existing pension scheme. Pension reform experiences of Latin America provide valuable insights for Central and East European (CEE) countries designing their pension schemes. Unlike many CEE countries that have already benefited from transformation of the tradition pay-as-you-go system, Bulgaria’s pension system remains considerably dependent on mandatory social security payments, which renders it inefficient compared to fully funded schemes. The authors suggest reform of the Bulgarian pension system along the following lines. Fist, the share of the mandatory social security payments has to be lowered. Second, additional mandatory social insurance (fully funded scheme) should be privately managed. Yet, given that success of these reforms depends to a great extent on development of the functioning capital market, experiences of Bulgarian economy up to date render the prospects rather bleak. |
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