Pension Reform in Six Countries. What Can We Learn From Each Other?

Transcription

1 Pension Reform in Six Countries What Can We Learn From Each Other?

2 Springer-V erlag Berlin Heidelberg GmbH

3 AxeI H. Barsch-Supan Meinhard Miegei Editors Pension Reform in Six Countries What Can We Learn From Each Other? With 36 Figures and 35 Tables Springer

4 Prof. AxeI H. Borseh-Supan University of Mannheim Department of Maeroeconomics and Public Poliey SchloB L 9, Mannheim Germany Meinhard Miegei Director of the Institute of Economics und Society in Bonn AhrstraBe Bonn Germany This publication is supported by Deutsches Institut rur Altersvorsorge (DIA) ISBN DOI / ISBN (ebook) Library of Congress Cataloging-in-Publication Data applied for Die Deutsche Bibliothek - CIP-Einheitsaufnahme Pension Reform in Six Countries: What Can We Learn From Each Other?; with 35 tables / AxeI H. BOrsch-Supan; Meinhard Miegel ed. - Berlin; Heidelberg; New York; Barcelona; Hong Kong; London; Milan; Paris; Singapore; Tokyo: Springer, 2001 This work is subject to copyright. AII rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag. Violations are liable for prosecution under the German Copyright Law. Springer-Verlag Berlin Heidelberg 2001 Originally published by Springer-Verlag Berlin Heidelberg New York in 2001 Softcover reprint of the hardcover 1 st edition 2001 The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover-Design: Erich Kirchner, Heidelberg

5 Editors' Preface AxeI Borsch-Supan and Meinhard Miegel The provision of retirement income is a dynamic system that needs to be adapted constantly to the ever changing economic and societal environment. Sometimes, incremental adaptations suffice; sometimes, however, larger reform steps are necessary. We see this evolutionary process both through history and across countries. Over and again societies are confronted with new challenges, not the least with respect to old age social security. At this juncture of history, almost all industrialized countries face rapid population aging and need. to adapt their pension systems to this historically unprecedented demographic change. The six countries in this study (Chile, Germany, Great Britain, the Netherlands, Switzerland, and the United States) have responded very differently to this new challenge. This is the point of departure for this book. Why did the countries respond so differently? What can we learn from each other? It is not the point of this book to provide a universally optimal solution to the pension problems caused by population aging. The six countries are simply too different in terms of their demographic and cultural, and in particular in terms of their historical and economic backgrounds. However, since national discussions tend to be surprisingly narrowly focussed even in times of globalization, there is much to learn by looking over the neighbor' s fence. And since some countries have reformed earlier than others, we even have the benefit of quite a few trials and errors in one country from which all other countries can learn. The book is based on a German study that has been initiated by the German Institute on Old-Age Provision in Cologne (Deutsches Institut fur Altersvorsorge, DIA, Koln). We are grateful for the generous financial support. DIA also published an edited and much abbreviated German translation of these country studies. Stefanie Wahl and Martina Borsch-Supan have edited earlier versions of the studies, and Stefanie Wahl has assisted this project at all stages. Melanie Liihrmann has supervised the compilation of this English version, and Tom Kiihner prepared the final manuscript. We owe them many thanks. AxeI Borsch-Supan, Meinhard Miegel

6 About the editors: AxeI Borsch-Supan is Professor for Macroeconomics and Public Policy at the Universitity of Mannheim, Director of the Institute of Economics and Statistics, and member of the Council of Advisors to the German Ministry of Economics and Technology. Meinhard Miegel is Director of the Institute of Economics and Society in Bonn and was a member of the Commission for Pension Reform at the German Ministry of Labor and Social Affairs. About the authors: Lans Bovenberg and Lex Meijdam are Professors of Economics at Tilburg University. Lans Bovenberg was until 1998 Scientific Director of the Dutch Central Planning Bureau and Advisor of the Dutch government for tax, pension and labor market policy. David Wise is Professor of Economics at the J.F.Kennedy School of Government of Harvard University and Director of the research area "Health and Retirement" at the National Bureau of Economic Research. Klaus Schmidt-Hebbel is Senior Research Economist at the National Bank of Chile. He was Senior Researcher at the W orid Bank responsible for pension systems and their macroeconomik implications. Richard Disney is Professor of Economics at the University of Nottingham, one of the Scientific Directors of the Institute for Fiscal Policy in London, and advisor of the Blair goverment for pension policy. Maria Verena Brombacher-Steiner is Deputy at the Swiss Federal Ministry for Social Affairs responsible for pensions and international social security treaties.

7 Table of Contents Editors' Preface About the Contributors v vi Six Countries - And No Pension System Alike Axei Borsch-Supan References 1 The German Retirement Insurance System Axei Borsch-Supan 1.1 A Brief History of the German Public Pension System 1.2 The Pillars Providing Retirement Income in Germany 1.3 Future Developments 1.4 Current Reform Options References 2 The Dutch Pension System A. Lans Bovenberg and Lex Meijdam 2.1 A Brief History of the Dutch Pension System 2.2 The Pillars Providing Retirement Income in the Netherlands 2.3 Future Developments 2.4 Current Reform Options 2.5 Conclusions References 3 The Swiss Three-Pillar Model Maria Verena Brombacher Steiner 3.1 A Brief Look at How the Swiss System of Old Age, Survivors and Disability Insurance Evolved 3.2 The Three Pillars of Old Age, Survivors and Disability Insurance in Switzerland 3.3 Future Developments 3.4 Amendments under Discussion References

8 viii Contents 4 The UK System of Pension Provision 87 Richard Disney 4.1 The Evolution of the UK Pension System The Development of a Multi-Pillar Pension System from 1975 to Future Prospects for the UK Pension Scheme Public Attitudes to Pension Reform A Summing Up 107 References United States: Support in Retirement: Where 111 We Are and Where We Are Going David A. Wise 5.1 Overview ofthe United States Social Security System Social Security and Other Forms of Retirement Support Future Developments Social Security Reform Summary 135 References Chile's Pension Revolution Coming of Age 139 Klaus Schmidt-Hebbel 6.1 A BriefHistory: From Public Pay-As-You-Go to Private 139 Fully-Funded Pensions 6.2 The Pillars Current Shortcomings Of Chile's Pension System And 164 Reform Options 6.4 Conc1usions 168 References 169 Abbreviations 171 List of Contributors 175