Pension Calculations for the PAYG and the Funded Pension System in Slovakia

Transcription

1 Pension Calculations for the PAYG and the Funded Pension System in Slovakia Peter Goliaš Academia Istropolitana Nova Professional Programme in Applied Economics and Finance FINAL PAPER August 2003 (updated in October 2003)

2 Abstract: This paper contains the summary of theoretical knowledge about the basic criteria used for the evaluation of performance of the Pay-As-You-Go (PAYG) and the Fully-Funded pension system. On basis of this knowledge the paper presents the calculations of pension and replacement rates for both systems in the Slovak Republic (SR). The calculations show that the PAYG system designed in the proposed legislation might be unsustainable in the mid-to-long run because of its generosity under the negative expected demography changes. By comparison of replacement rates under different appreciation of the assets in the Fully-Funded system and different real wage growth rates in the SR the calculations show under what conditions the Fully-Funded pension system outperforms the designed PAYG.

3 Introduction Contemporary social security system in the SR is the unfunded pay-as-you-go system where current workers pay current pensioners. Since 1997 this system is complemented by relatively smaller voluntary and private fully funded system. The PAYG covers the old-age, disability and survival pensions. It is administrated by the Social Insurance Agency, which is a state-owned institution, separated from the state budget. Since 1997 the PAYG has generated deficit mainly because of high unemployment (the state pays low contributions for the unemployed people) and high evasions (people avoid to pay contributions). The evasion is a result of low motivation of people to pay into the system because the old-age pension does not sufficiently reflect the amount of contributions paid during their working life. In the future the demography crisis will create further pressure on the balance of the PAYG. In order to stop the growth of the pension system s deficit and to mobilize individual effort to secure suitable living standard in retirement age, the new government decided after the parliamentary elections in autumn 2002 to reform the pension system. This process should be carried out within the next year, preparing the legislation framework in 2003 and completely starting the new system in January The following statement regarding the pension reform is incorporated in the Program Statement of the Government of the SR:...Important reformatory principle is strict separation of solidarity within the society by individual mandatory savings or insurance. Costs of the social solidarity have to be covered from clearly named sources. On the other hand, the contribution burden should be a tool of personal savings or insurance and should be based on strict meritoriousness. The government will set up framework for gradual creation of safe and fair pension system, based on three main pillars that will be universal for all productive citizens. To stop the demography-contingent growth of the unfunded pension system s internal debt and to mobilize individual effort on everyone s living standard in retirement age are goals of the reform. Contributions to the unfunded pay-as-you-go system should be lowered as much as possible, however considering the government s capacity to assure sources for the Social Insurance Agency. The social security system is basically supposed to provide adequate pensions, to guarantee the system s overall stability and its financial sustainability. Together with maximization of safety of the whole system these are the crucial points of the introduced pension reform. In April 2003 the Slovak government approved the Conception of the Pension Reform in the SR. According to this document, better recognition of property rights and personal freedom and responsibilities should be assured by shifting as much responsibilities as possible to the private sector and individuals. The new system should be based on three pillars that will be universal for all productive citizens with the exception of soldiers and policemen: mandatory, state-owned and -administrated, non-funded, pay-as-you-go pillar; mandatory, state-owned and -regulated, private-administrated, fully funded pillar; voluntary, private-owned and -administrated, state-regulated, fully funded pillar. Table 1: The rate of mandatory contributions (percentage of gross wage)

4 Before reform After reform* together old age disability & survival reserve PAYG 28% 9% 6% 4.75% Funded - 9% - - Source: Ministry of Labor, Social affairs and Family in the SR (legislative proposals) The rate of the old-age pension contributions should be 9% of the gross wage to the PAYG pillar and 9% to the new, mandatory fully funded pillar. All citizens up to a defined age (approximately 45 years) will have an opportunity to enter for the new, fully funded pillar. Once entering, there will be no way back. Young people first entering the labor market and self-employed people will have an obligation to move to the second pillar. The older people will stay in the PAYG. The new mandatory, fully funded pillar is introduced by a proposal of new Law on Old-Age Pension Savings. The government approved it on October 2, 2003 and it should come into force since The infrastructure - mainly creation and licensing of new pension companies - should be created in one-year period. People will have opportunity to switch to this pillar since January 2005 till June According to the Slovak government s intentions, to yield the maximum benefit, the private pension assets managers competing on the market should manage the mandatory, fully funded pillar. They should be supervised strictly and prudently by an independent institution Slovak Central Bank. However, the money paid into the second pillar will not be private ownership of savers, but will be paid through SIA and included in the public finances. The founders of pension companies will have to be credible financial institutions with at least 3-year experience. Minimum basic capital of pension companies is set to SK 300 million (EUR 7.1 million). Table 2: Each pension company will manage three funds Stocks Bonds & Money Market Instruments Risk & Return Growth fund up to 80% no limit high Balanced fund up to 50% at least 50% middle Conservative fund no stocks 100% low Each saver may hold the assets only in one fund at the same time. Up to 15 years before retirement he may not hold assets in the growth fund and up to 7 years assets in the balanced fund. The securities must be traded on a public stock exchange and have investment rating from prestigious rating agency. The investment on the foreign markets may not exceed 50% of the funds portfolio. The state will guarantee neither a specific performance of pension funds, nor the principal value of paid contributions. However, the value of funds assets will not be allowed to fall below 80% of the actual average value in other funds. The pension will be paid out by life-insurance companies. In case of fraud or malefaction the state will guarantee 100% of granted pension. Transition costs: Creation of the second pillar causes high transition costs appearing in several on-coming decades. These costs are a consequence of diverting contributions from the PAYG to the second pillar. Thus, Social Insurance Agency (PAYG) receives less money but it still has to pay out current pensioners. Therefore, transition costs depend positively on the contribution rate and on the number of people who decide to move to the second pillar. The political decision was, that these costs can not exceed 1% of Slovak GDP yearly (in 2005 circa SK 15 billion or EUR

5 0.36 billion). Large part should be covered from the reserve fund in the reformed PAYG. This pillar will generate higher revenues after prolonging the retirement age. The remainder may be covered from privatization revenues (government has saved SK 65 billion, or EUR 1.55 billion), state budget and loans. To keep transition costs below 1% of GDP, substantial changes effected the original proposal: the disability and survival insurance was removed back to the first pillar and the 10% contribution rate for the second pillar was decreased to 9%. Voluntary, Private, Fully Funded Pension System: The reform of the third pillar is introduced by a proposal of new Law on Complementary Pension Savings. The government has not approved it yet, but it is planed to come into force since By applying the regulations valid for standard asset management companies (independent supervisory authority, strict separation of pension funds from pension companies assets), the reform strengthens regulation and supervisory conditions. It also substitutes the tax exemption support for the direct state payments to the savers.

6 CHAPTER 1: The Economics of Pensions Retirement pensions have one primary economic function for the individual. By saving some of the income during the working years and contributing it to a pension scheme, instead of consuming everything, the individual is able to smooth his lifetime consumption. Related, such redistribution over time also contributes to preventing old-age poverty. There are two ways (Barr 1998) of obtaining a claim on future output, either by saving a stock of money (fully funded scheme), or by purchasing a promise of a share of future production (PAYG scheme). In the fully funded system the workers save part of their wage and accumulate these savings in order to use them after retirement. The PAYG scheme is based on the intergenerational exchange, when current workers pay current pensioners and thus buy a promise to be paid later. A good deal of analysis of the relative merits of funded and unfunded social security has rested on the scheme satisfying the so-called Aaron-Samuelson condition, named after seminal articles by Aaron (1966) and Samuelson (1958). Following this condition, the real rate of return in a mature PAYG system is equal to the sum of the rate of growth of the labor force and the rate of growth in productivity, the latter of which can also be expressed alternatively as real wage growth (Orszag 1999, p.17). Since the labor force changes only slowly, and wages tend to be a constant fraction of national income, the Aaron-Samuelson condition implies that the real return on contributions in a mature pay-as-you-go scheme will be approximately equal to the rate of growth of gross domestic product. Samuelson considered an economy where goods were perishable and where people sought to retire from producing their own consumption goods later in life. His point was that individual lifetime utility could be maximized if a social contract could be arranged, so that each generation paid a pension to each preceding generation, such that the implicit return on the contract was equal to the rate of population growth. Since the return on storing perishable goods was negative and population growth was likely to be positive, such an unfunded scheme could be socially optimal. Aaron s generalization of this rule linked the equilibrium return on unfunded social security to the rate of growth of earnings, being the sum of earnings growth per head and the growth of population. Equation 1: Aaron-Samuelson condition ( n g ) r = + Table 3: Variables used in Aaron-Samuelson condition r real rate of return in PAYG n rate of growth of the labor force g rate of growth in productivity (real wage growth, sometimes referred to as a speed of technological advance) Participants in the private pension funds are accumulating capital that is invested in the capital markets. Thus they earn a return on their investment portfolio that may consist of stocks, bonds and other assets. Equity is too volatile to provide stable income in retirement years, although it can be a valuable component of an investment

7 portfolio during the accumulation phase. Bonds provide savers with a more stable income, at the cost of a lower rate of return. For this reason, clients of pension funds invest primarily in equity, to gain the advantage of a large, though volatile, return, and then shift gradually to bonds as the date of retirement approaches. The mechanical application of the Aaron-Samuelson condition, in a world with capital, would compare the real rate of return on capital (the return on a funded scheme) with the real return on an unfunded scheme, as derived above. Where the latter was high, an unfunded scheme was superior to each generation relying on its own saving. However, it is necessary to subtract from the gross returns on capital the costs of administration, which are everywhere higher for private than for public pension plans, and are particularly high in case of private individual accounts (Willmore 1998). Equation 2: Application of the Aaron-Samuelson condition ( n + g c ) ( a ) 1? c 2 Table 4: Variables used in Application of the Aaron-Samuelson Condition c1 costs of administration for private pension plans c2 costs of administration for public pension plans a real rate of return on capital (the return on a funded scheme) Note: This paper does not include cost analysis of different pension systems. Therefore, in the following discussion, the net terms of the real rate of return in the PAYG as well as in the fully funded system is considered. The net return means the return adjusted for the costs of administration and possible taxes imposed on the pension system. The validity of preceding equation confirms also the stationary solution of the overlapping-generations model that examines the social security system and capital accumulation. This economic model studies a sequence of overlapping generations of individuals each living for two periods. In their young age, individuals work and in their old age, individuals retire. Under social security (pay-as-you-go) the old-age generation receives money from the young-age generation to finance its consumption. Under capital accumulation (fully funded) the old-age generation finances its consumption from the money accumulated during the working life. The stationary solution is obtained after maximizing the utility of consumption for both systems. However, neither of mentioned methods analyzes the effect of change in labor force on the real rate of return on capital. It is obvious that fewer people at work, they need to be more productive in order to produce the same product. Thus, the performance of company producing this product and the price of its shares depends not only on technology but also on the number of workers employed. Fewer workers - lower price of shares (rate of return on capital), holding other things such as productivity constant. The idea that demographic forces have a powerful impact on economic activity more generally on capital accumulation and output and hence on the stock market, is far from new. It formed the basis for the classic studies of Kuznets (1958, 1961) on the

8 influence of long swings in the growth of population on capital accumulation and the stock market in the late 19 th and early 20 th centuries. More recently the controversial paper of Mankiw and Weil (1989) studied the impact of predictable demographic change on the housing market, a problem which is close in spirit to the problem investigated by Geanakoplos, Magill (2002), who developed predictability model of the stock market based on demography expectations. Their model supports the view that a substantial fall in the price-earnings ratio is likely in the next 20 years in the US economy as a consequence of negative demographic development. The same feature may be explained by the supply-demand analysis on the stock market. The assumption is that all workers buy shares in order to accumulate capital for later retirement and all pensioners sell their assets in order to provide money for financing their consumption. With the demography crisis the number of workers decreases while the number of pensioners increases, holding other things such as retirement age equal. More pensioners are willing to sell their assets - higher is the supply of these assets on the stock market. On the other hand, fewer workers are willing to buy assets - lower is the demand for these assets. With the time, the demography crisis translates in a rightward shift of the supply curve, from S(t) to S(T), and in a leftward shift of the demand curve, from D(t) to D(T). This causes a fall in stock prices and in the rate of return on capital. Figure 1: How does the demography crisis influence stock prices Price of Stocks and Demography Crisis 12 Price Quantity Supply (t) Demand (t) Supply (T) Demand (T) The preceding analysis shows, that if capital is accumulated in economy with changing labor force, the rate of return on capital is changing as well and needs to be adjusted for n or the rate of change in labor force. Therefore, holding other things equal, the country with negative demography expectations can avoid possible downturn in the rate of return of its pension system only if it exports capital to the economy with stable or positive demography changes.

9 CHAPTER 2: Calculations 2.1 Fully Funded Pension System Under the funded pillar the pension depends on the amount of money that the worker saved on his personal account during his working life and on the net rate of return on that savings that the pension company was earning during the saving period. The bulk of money saved depends on contribution rate, wage and length of saving period. Table 5: Variables used in the calculation of pension under the funded system W monthly gross wage of worker at the time when he starts to save c contribution rate (percentage of monthly gross wage that the worker saves on his personal account) g average yearly real wage growth during the working life of worker a average yearly real rate of return on savings earned by pension company during the savings and the retirement period after subtracting all administration fees and taxes (net appreciation) S savings at the time when worker retires S t savings period R average monthly pension R t retirement period r replacement rate for the funded system (ratio of average monthly pension to monthly gross wage earned at the last month of working life) Assumptions made for purposes of this calculation: Constant arguments: The contribution rate to the funded system c and the average real wage growth g are assumed to be constant during the productive life of the individual. The average real rate of return (net appreciation) on savings a is assumed to be constant during the productive life and the retirement period of the individual. In real life a tends to be higher at the beginning of savings period and decreases as retirement approaches and investment portfolio gets less risky. Equations: The amount of savings at the time when worker retires is computed using the formula for geometrical series with the combined cumulative effect of real wage growth and real rate of return on capital. Equation 3: Savings in fully funded system S = ( W * c *12)*( 1+ a) St St 1+ g 1 1+ a * 1+ g 1 1+ a

10 If real wage growth equals real rate of return (i.e. g=a) then the formula reduces to: Equation 4: Savings in fully funded system if g=a ( W * c *12)* St *( g) St S = 1+ The average monthly pension is computed as an annuity resulting from the amount of savings. Simplifying assumption is made, that the remainder on personal account during retirement is appreciated at the same rate a as it was during savings period: Equation 5: Pension in fully funded system R S * a *( 1+ a) ( 1+ a) = Rt /12 1 Rt If the average yearly real rate of return on savings equals zero (i.e. a=0) then the formula reduces to: Equation 6: Pension in fully funded system if a=0 S R = Rt /12 The replacement rate for funded system is computed as a ratio of average monthly pension to monthly gross wage earned at the last month of individual working life: Equation 7: Replacement rate in fully funded system r W * R = St ( 1+ g) * Natural PAYG Pension System Under the PAYG, the amount of pension depends on money currently available at the central insurance agency and on ratio of life-long individual contributions to average contributions. Average contributions were being paid by individual who was earning the average wage in the economy during his whole working life. Money currently available at the central insurance agency equal the actual sum of contributions of productive people, so it depends on actual employment in the society and on actual contribution rate. The change in employment (labor force) depends on demography changes, change in legal year of retirement and changes in the rate of unemployment.

11 Table 6: Variables used in calculation of pension under natural PAYG W monthly gross wage of worker at the time when he starts to pay contributions to PAYG W e average monthly gross wage in the economy at the time when worker starts to pay contributions to PAYG c contribution rate (percentage of monthly gross wage paid by worker to PAYG) g average yearly real wage growth during working life of worker D t dependency ratio in 2002, D t = D dependency ratio at the time of retirement S money paid to PAYG up to the time when the worker retires S t length of contribution paying (working life) R average monthly pension R t retirement period r replacement rate in PAYG (ratio of average monthly pension to monthly gross wage earned at the last month of working life) Note: Dependency ratio is computed as a number of people employed in the economy divided by number of retired people. Assumptions made for purposes of this calculation: Constant arguments: Contribution rate to the PAYG system c is assumed to be constant during productive life and retirement period of individual. The average real wage growth g is assumed to be constant during productive life of individual. Zero solidarity: Calculation is based on an assumption of zero solidarity, under which the central insurance agency distributes all money available among pensioners. This is done with full respect to the principle of merit, so that relative length of working life and relative contributions paid reflected fully in the amount of pension. Expected changes in the rate of unemployment: The number of unemployed people is counted out of the working force. The assumption is made that the working force (people ready to work, i.e. employed plus unemployed) makes up 83% (actual number in 2002) of people in productive age and will be constant until Table 7: Expected changes in the rate of unemployment Year % Source: Conception of the Pension Reform in the Slovak Republic, April 2003 Demography changes: Demographic Research Center in Bratislava forecasted several scenarios of demography changes in Slovakia. Three of them are used in the following calculation - young, middle and old scenario. All of them consider possible effects of migration. The actual population of the SR should lie within bounds of young and old scenario with the highest probability around middle scenario. For purposes of this calculation the fourth alternative, where the demography does not change at all, has been conducted. The objective is to compare the pension under different demography scenarios with the pension under demography status quo.

12 Table 8: Demography scenarios Mortality Fertility Migration Young scenario high high high Middle scenario middle middle middle Old scenario low low low Source: Demographic Research Center, Bratislava Dependency ratio: The following graphs display the expectations of time-changes in the dependency ratio for different demography scenarios. The dependency ratio is computed as the number of employed people in the economy divided by the number of retired people. Disabled people, students, people in military service and people on maternity leave are not included in the number of employed people. The assumption is that this group makes up 13% (actual number in 2002) of people in productive age and will be constant until The data is adjusted for expected changes in the rate of unemployment. Therefore, the expected fall in the rate of unemployment is a reason of slightly increasing curve under no change scenario. Figure 2: Changes in the dependency ratio Men and women retire at 60 Dependecy ratio No change Young version Middle version Old version Men and women retire at 62 Dependecy ratio No change Young version Middle version Old version

13 Men and women retire at 65 Dependecy ratio No change Young version Middle version Old version Source: Demographic Research Center, INFOSTAT Bratislava Equations: The average monthly pension of particular individual is computed as an average contribution paid into the central insurance agency (public pension system) during retirement period of that individual. This amount is adjusted for: 1. wage ratio (W/W e ) - ratio of the wage that this individual has earned during his productive life to the average wage in the economy 2. employment ratio (D/D t ) - ratio of the dependency ratio at the time of retirement to the dependency ratio in ratio of the working life to the retirement period (S t /R t ) Equation 8: Pension in PAYG R = ( We * c *12)*( 1+ g) St * ( 1+ g) g Rt 1 W / Rt /12* * We D Dt * St Rt If the average real wage is constant during the working life of individual, i.e. the yearly real wage growth is zero, then the formula reduces to: Equation 9: Pension in PAYG if g=0 W D R = [( We * c *12)* Rt / Rt] /12* * * We Dt The replacement rate for PAYG system is computed as the ratio of average monthly pension to monthly gross wage earned at the last month of working life of individual: Equation 10: Replacement rate in PAYG St Rt r W * R = St ( 1+ g) *100

14 2.3 Designed PAYG Pension System The reform of current PAYG pillar is introduced by a new Law on Social Insurance. The Law has been approved by the Parliament on September 24, 2003 and should come into force since Generally, it brings two major innovations: 1. Gradual prolonging of legal retirement age from the average 55 years for women and 60 years for men to the final 62 years for both genders. All men will retire at the age of 62 since 2006 and all women since New formula of pension calculation. Equation 11: Pension in designed PAYG R = POMB * St * ADH In comparison with present formula, this one gives higher pension to those who paid more money to the system during their working life and vice versa. Thus, it should renew the motivation of people to pay contributions and eliminate evasion. The variable S t stands for a number of years of paying contributions to the social insurance agency (savings period). The variable ADH (Actual Pension Value) is a number given directly by law on basis of special calculations aimed at providing the 50% replacement rate in the first year of reform. For 2004 the ADH has been set at The proposal assumes automatic yearly valorization of this number by the average nominal wage growth in the economy. For simplification the calculation presented in this paper assumes that the ADH will be valorized each year by the average real wage growth in the economy, which is equivalent of the nominal wage growth adjusted for the inflation. However, as shown in conclusions, this model is unsustainable because it does not reflect changes in employment, caused by demography, migration or unemployment changes. Better solution would be to valorize the ADH by the rate of change of real money available at the Social Insurance Agency (collected contributions). The variable POMB (Average Personal Wage Point) represents the ratio of individual gross wage to average gross wage in the economy. It will be the average of ratios respective to each year since 1994 till the last year of employment. For example POMB 1.00 would mean that the worker has earned the average wage in the economy; with 0.50 he has earned half the average wage; with 2.00 twice the average wage. Full values of POMB below 1.00 and above 1.25 would be employed gradually in a three-year transition period. Afterwards, system should offer zero solidarity between rich and poor and people with pension lower than living wages should be supported directly from the state budget. Maximum achievable POMB should be 3.00.

15 Conclusions The following tables display the rates of replacement under the Funded and the PAYG pension systems respective to different real wage growth and real rate of return (net appreciation). The results have been computed for average-wage-worker under assumptions of 10% contribution rate, 40-year productive life and 20-year retirement period. The results for natural PAYG have been computed under assumptions of 0% rate of unemployment and 65 legal retirement age. Table 9: Replacement rates in the Funded pillar Real Rate of Return Funded Real Wage Growth % Table 10: Replacement rates in the PAYG pillar PAYG Real Wage Growth % Middle Young No change Designed Note: While evaluating the results one has to have in mind that changes in labor force (i.e. demography changes and changes in the rate of unemployment) have not been encountered in the real rate of return on capital under the Funded system. Conclusion 1: The designed PAYG system is more generous than the natural PAYG in all cases except for the unrealistic no change scenario of demography development. This is due to the fact, that the formula used for calculation of pension under designed PAYG does not reflect demography changes. As a consequence designed PAYG system might be unsustainable in the mid-to-long run if the real demography changes would confirm today s negative expectations. The following graph shows the performance of fully-funded pillar, designed and natural PAYG pillars (young scenario of demography changes). The graph shows relationship between real wage growth and replacement rate. Performance of the funded pillar is tested at the same rate of net appreciation and real wage growth.

16 Figure 3: Performance of Funded and PAYG pillars Performance of Pillars (if g=a) replacement rate (in %) Funded PAYG/des. PAYG/young real wage growth, appreciation (in %) Conclusion 2: The designed PAYG outperforms the Funded pillar up to the 1% growth of real wage and appreciation. The opposite holds for the higher growth rates. The natural PAYG offers lower replacement rates at all levels of real wage growth and appreciation. The Aaron-Samuelson condition indicates that the difference in pension under the same rate of return on capital a and real wage growth g may be explained by change in labor force. Thus, the lower pension under the PAYG system reflects negative change in labor force what is in line with the actual expectations of the Demographic Research Center in Slovakia. The following graph shows the performance of fully funded system and PAYG nochange scenario with legal retirement age at 60 and 65. As before, the performance is tested at the same rate of net appreciation and real wage growth, but results for PAYG have been computed under contemporary 15% rate of unemployment. Figure 4: Performance of the Funded and the PAYG no-change pillars Performance of Pillars (if g=a) replacement rate (in %) Funded PAYG/60 PAYG/65 real wage growth, appreciation (in %)

17 Conclusion 3: The replacement rates under PAYG/65 no-change scenario are significantly higher than under Funded system. According to the Aaron-Samuelson condition this might be explained by increase of labor force after prolonging the legal retirement age from the average 55 years for women and 60 years for men to 65 years for both genders. Almost identical curves of Funded system and PAYG/60 no-change scenario indicate that if demography and unemployment does not change (labor force is constant) in the economy, both systems provide for almost the same pension.

18 References: 1. Barr, Nicholas, 1992, Economic Theory and the Welfare State: A Survey and Interpretation, Journal of Economic Literature. 2. Barr, Nicholas, 1998, The Economics of the Welfare State, 3 rd edition, Oxford University Press. 3. Conception of the Pension Reform in the Slovak Republic, April 2003, Government of the SR. 4. Disney, Richard, 1998, Crisis in Public Pension Programmes in OECD: What are the Reform Options, Discussion Paper 98/20, School of Economics. 5. Geanakoplos, John; Magill, Michael; Quinzii, Martine, 2002, Demography and the long-run predictability of the stock market, Discussion paper No. 1380, Yale University. 6. Kuznets, Simon, 1958, Long Swings in the Growth of Population and in Related Economic Variables, Proceedings of the American Philosophical Society. 7. Kuznets, Simon, 1961, Capital and the American Economy: its Formation and Financing, Princeton University Press. 8. Mankiw, N. Gregory and Weil, David, 1989, The Baby Boom, the Baby Bust and the Housing Market, Regional Science and Urban Economics. 9. Orszag, Peter R., 1999, Individual Accounts and Social Security Does Social Security Really Provide a Lower Rate of Return?, Center on Budget and Policy Priorities. 10. Prognosis of the Population Development in the SR until 2050, November 2002, Demographic Research Center, INFOSTAT Bratislava. 11. Program Statement of the Government of the Slovak Republic, November 2002, Government of the SR. 12. Proposal of a new Law on Social Insurance in the Slovak Republic, June 2003, Ministry of Labor, Social Affairs and Family of the SR. 13. Proposal of a new Law on Old-Age Pension Savings, Disability Insurance, and Survival Insurance in the Slovak Republic, August 2003, Ministry of Labor, Social Affairs and Family of the SR. 14. Samuelson, Paul, 1958, An exact Consumption-Loan Model of Interest without the Social Contrivance of Money, Journal of Political Economy. 15. Willmore, Larry, 1998, Public versus Private Provision of Pensions, DESA Discussion Paper Series, United Nations Organization.