World Bank Pensions Core Course 2010 November 8 to 19, 2010 Washington, D.C. Room MC C2-131 DRAFT COURSE AGENDA as of July 6, 2010 This course aims to provide policymakers and other stakeholders in developing countries with an overview of the approaches for analyzing pension systems and policy and institutional reform options. The course reviews the lessons from recent pension reforms around the world and uses team exercises for participants to explore reform options for developing country examples. Speakers include recognized experts in Pensions from the World Bank as well as from other international organizations. The agenda includes the application of different pedagogical methods including: instructional presentations on the key approaches to the design and reform of public and private pension systems and institutional development challenges; presentations and applied cases using a diagnostic methodology and modeling techniques; presentations from select case studies illustrating the challenges and lessons learned from different reform measures employed; and hands-on participatory workshop sessions in which course participants will work in groups to design reform programs for country cases which apply the instructional content. The program agenda is organized as follows: Day 1 Monday Day 2 Tuesday Day 3 Wednesday Day 4 Thursday Day 5 Friday (shortened session) Day 6 Monday Day 7 Tuesday Day 8 Wednesday Day 9 Thursday Day 10 Friday (shortened session) Introduction: Framework for Pension Analysis and Pensions Concepts Pensions Identities and Design Options Design Options (Cont.) Diagnostic Techniques and Tools Country and Regional Experiences Governance and Investment Management Administration, Regulation, and Supervision Special Issues Special Issues (Cont.) Presentation of Group Reform Programs
Day 1: Introduction Framework for Pensions Analysis: Concepts Monday, November 8 8:30-9:00 Registration & Breakfast 9:00- Welcome to Participants 10:00 Opening Remarks Objectives, Format, Logistics Open Discussion by Course Participants of Expectations and Desired Results 10:00-10:30 10:30- - 12:30 Arup Banerji (World Bank) and Robert Holzmann (World Bank) Introduction to Course Organization Mark Dorfman (World Bank) Coffee Break Session 1: A Framework for Analysis of International Pension Objectives, Challenges and Reform Issues Objectives of public and private pension systems Common challenges: Global Aging, Globalization, Changes in Family Patterns, Long-term International Financial Market Trends Metrics for evaluation: adequacy, affordability, predictability, equity, sustainability and robustness Dimensions of reform: changes to pension architecture, parameters, funding strategy, risk-sharing Role of governments, employers, employees, families, mix of risksharing Robert Holzmann (World Bank) Lunch Break 12:30-2:00 2:00-3:30 Session 2: Pension Concepts Demographic parameters: fertility, mortality, longevity, disability Economic parameters: wage growth, interest rates, rates of return on pension assets, discount rates System qualifying conditions: firm size, minimum income thresholds, vesting requirements System benefit parameters: accrual rate and target replacement rate, contribution rates and income thresholds, retirement age, valorization, benefit indexation System contribution rates, floors and caps on covered wages, basic salary verses total compensation Tatyana Bogomolova (World Bank) 3:30-4:00 Coffee Break 4:00-5:00 Workshop Session 1: Introduction to Group Projects Objectives of the Group Exercises Formation of Working Groups Discussion of Objectives, Work Plan and Expected Outcomes Distribution of Template for Group Exercises Mark Dorfman (World Bank) - 2 -
9:00-10:30 10:30- - 12:30 Day 2: Pension Identities and Design Options Tuesday, November 9 Session 3: Pension Identities Relationships between input parameters and system qualifying conditions and benefits and long-term system financial sustainability Key roles of retirement age, contribution rate, and accrual rate Identities and relationships for defined-contribution schemes including wage growth, interest rates, inflation, and annuity factors Impact on system sustainability and benefits of changes in key demographic and economic parameters Tatyana Bogomolova (World Bank) Coffee Break Session 4: Earnings-related Partially Funded and PAYG Schemes Objectives, Parametric Reform Options and Experience Relationship between qualifying conditions, contributions, benefits, and long-term system financial sustainability (continued) Rationale behind parametric reforms: limiting present or future fiscal burden Clarifying pension objectives setting parameters consistent with objectives: targeted population, income replacement, minimum income support/insurance against poverty, coinsurance of other risks, system sustainability Reforming qualifying conditions: firm size, minimum income thresholds, vesting requirements Reforming contribution rates Reforming benefit parameters: accrual rates, retirement age, valorization, benefit indexation David Robalino (World Bank) Lunch Break 12:30-2:00 2:00-3:00 Session 5: Funded Schemes, 2 nd Pillar Reforms and Modifications Funding options Enabling conditions for introducing funded schemes Benefits and risks of funded schemes and who bears which risks Centralized verses decentralized Investment responsibility central, corporate, individual Necessary conditions for privately-managed funded schemes Options for funding transition costs Anita Schwarz (World Bank) 3:00-4:00 Session 6: Non-financial (Notional) Defined Contribution Schemes Rationale Technical framework Pros and cons, benefits and risks Results to date Robert Holzmann (World Bank) 4:00-4:30 Coffee Break - 3 -
4:30-5:30 Session 7: Civil Service Pension Design and Reform Options: The Case of the United States Thrift Savings Plan Background core objectives for the TSP Contribution and benefit design Investment policy and strategy Information infrastructure Efficiency levels achieve Case Study: Pension Reform in China Jim Petrick (Thrift Savings Plan) Welcome Reception: 6:00pm-8:00pm - 4 -
Day 3: Design Options (Cont.) Wednesday, November 10 8:30-9:00 Breakfast 9:00- Session 8: Occupational Pension Schemes and Other Voluntary Pension 10:30 Arrangements Design options Regulatory and supervisory requirements Tax incentives Impact on increasing pension savings Richard Hinz (World Bank) 10:30- Coffee Break - 12:30 Session 9: Civil Service Pension Reform Needs and Options Objectives and constraints: Fiscal sustainability, the package of incentives to attract and retain public servants Typology of civil service schemes integrated/parallel with public schemes Alignment of labor market incentives between public and private sector workers Achieving portability for labor market efficiency Financing strategies Reform options Ed Whitehouse (OECD) Group Photo Session MC Atrium 12:30-12:45 12:45- Lunch Break 2:00 2:00-5:30 Session 10: Symposium on Global Aging: Implications for Pensions, Labor and Financial Markets Aging Patterns Worldwide: Mark Dorfman Implications for Labor Markets: David Robalino Implications for Financial Markets: Robert Holzmann Policy Responses: Robert Holzmann and David Robalino - 5 -
Day 4: Diagnostic Techniques and Tools Thursday, November 11 9:00-10:30 Session 11: Mapping out a Reform - The Diagnostic Process 10:30- - 11:45 11:45-12:30 A. Assessment of the Prevailing Environment Demographic Economic Financial and Institutional Informal Support to the Elderly B. Assessment of the System Design Structure (zero Pillar, 1 st Pillar, 2 nd Pillar, 3 rd Pillar, 4 th Pillar) Qualifying Conditions Parameters (for contributions, DB schemes, points schemes, NDC Schemes, DC Schemes, Indexation) C. Performance Indicators Coverage Adequacy Financial Sustainability Affordability Economic Efficiency Administrative Efficiency Security Edward Whitehouse (OECD) Coffee Break Session 12: The Diagnostic Process Applied to Two Country Cases Modeling Techniques (Apex, PROST) Benchmarking Environment, Design and Performance Edward Whitehouse (OECD) Session 13: Simulating baseline and reform option scenarios applying the Pension Reform Options Simulation Toolkit (PROST) The importance of long-term projections of pension revenue and expenditure streams. Description of the Model Use of PROST to model baseline trends Required data inputs Options for setting and testing demographic and macroeconomic assumptions. Options for measurement and valuation of rights for past service. Testing for robustness Options for modeling both parametric and structural reforms Tatyana Bogomolova (World Bank) 12:30-2:00 Lunch Break - 6 -
2:00-3:30 Session 14: Simulating baseline and reform option scenarios applying the Pension Reform Options Simulation Toolkit (PROST Cont.) Tatyana Bogomolova (World Bank) and Asta Zviniene (World Bank) 3:30-4:00 Coffee Break 4:00-5:30 Group Discussion of Pension Reform Needs and Options Applying the Pensions Diagnostic Methodology This session will consist of a hand-on group exercise in which participants apply the diagnostic tools introduced during the course of the day, formulate reform options, and evaluate the long-term financial impact of such options. Application of the diagnostic methodology to two case studies Benchmarking performance using the World Bank Pensions Database Examining Pension Entitlements with the Axia Apex model Simulating reform options using PROST Edward Whitehouse (OECD), Mark Dorfman (World Bank) and Tatyana Bogomolova (World Bank) - 7 -
Day 5: Country Experiences Friday, November 12 8:30-9:00 Breakfast 9:00-10:30 Session 15: Pension Reform Challenges and Trends in The Middle East and North Africa Common characteristics economic composition, pension system architecture, coverage Common design characteristics defined benefit PAYG, provident funds, social pensions Common reform designs Remaining issues to be addressed Gustavo Demarco (World Bank) 10:30- Coffee Break - 12:30 Session 16: Pension Reform Challenges and Trends in Latin America Economic characteristics economic composition, pension system architecture, coverage Pension design characteristics and recent reform measures defined benefit PAYG, 2 nd pillar reforms, regulated voluntary occupational schemes, social pensions Common challenges coverage, compliance, competition, cost Rafael Rofman (World Bank) and Gonzalo Reyes (World Bank) 12:30-1:30 Lunch Break 1:30-2:30 Session 17: Pension Reform Challenges and Trends in Europe and Central Asia Common reform needs improving fiscal sustainability and incentives Common approaches Recent adjustments in multi-pillar schemes Continuing challenges: coverage and costs Anita Schwarz (World Bank) EARLY DISMISSAL - 8 -
Day 6: Governance and Investment Management Monday, November 15 9:00-10:30 Session 18: Pensions Governance Guidelines for Governance of Private Pension Funds Application of the Guidelines to Public Pension Funds Governance Experience in OECD Countries Governance Challenges in Developing Countries Approaches to Improving Pension Governance Juan Yermo (OECD) 10:30- Coffee Break - 12:45 Session 19: Pension Investment Management Framework Governance Structure Investment Policy Investment Management Risk Management Performance Measurement Accounting and Reporting Sudhir Rajkumar (World Bank) 12:30-2:00 Lunch Break 2:00-3:30 Session 20: Challenges of the Design of Annuitization Requirements for development of private annuities markets Annuitization of public schemes- best practice parameters Phased withdrawal alternatives Insurance policies to cover longevity risks Reflection on case studies to date Heinz Rudolf (World Bank) 3:30-4:00 Coffee Break 4:00-6:00 Workshop Session 3: Group Projects - 9 -
Day 7: Administration, Regulation and Supervision Tuesday, November 16 9:00-10:30 Session 21: Pension Administration Collections and Data Management Collection of pension contributions Institutional setup and operational requirements Organization of information flows Issues in collection unification with other programs Reforms with instituting individual accounts Cost implications of various options General IT requirements Key decisions in developing/procuring MIS Operational innovations in expanding the coverage Public policy choices surrounding personal identification numbers Lawrence Thompson (Consultant) and Oleksiy Sluchynskyy (World Bank) 10:30- Coffee Break - 12:30 Session 22: Pension Administration Design and Reform Options (Cont) Administration of benefit payments Institutional setup Identification of members Handling and decision making on claims Setup of disability identification and payments Survivors provisions and payment administration Payment systems and methods Innovative solutions in identifying members Options with payment service providers Issues in universal pension program management Cost implications of different design options Lawrence Thompson (Consultant) and Oleksiy Sluchynskyy (World Bank) 12:30-2:00 Lunch Break 2:00-3:30 Session 23: Regulatory Reform Existing conditions- common law vs. Napoleonic code approaches; pre-existing architecture of enabling laws (trust law, companies laws, labor laws) Objectives of pension regulatory reform Sequencing of regulations Complementary reforms to financial market laws, labor market regulations Richard Hinz (World Bank) - 10 -
3:30-4:00 Coffee Break 4:00-5:30 Session 24: Supervision of Public and Private Pension Systems Different approaches and models on pension supervision Interface between Pensions and other financial market supervisors Integrated vs. specialized pension supervision Risk-based supervision Richard Hinz (World Bank) - 11 -
8:30-9:00 Breakfast 9:00-10:30 10:30- - 12:30 Day 8: Special Issues Wednesday, November 17 Session 25: Coverage and Social Pensions Characteristics and Needs of Rural Workers and Retires Matching Defined Contribution Approach Links between Preand Post-retirement Subsidies. Robert Palacios (World Bank) and Oleksiy Sluchynskyy (World Bank) Coffee Break Session 26: Survivorship Benefits in Social Security Schemes Approaches to survivorship benefits in social security schemes Benefit designs and economic effects Estelle James (Consultant) Lunch Break 12:30-2:00 2:00-3:30 Session 27: Disability Benefits in Social Security Schemes Approaches to disability insurance in social security schemes Benefit designs and economic effects Estelle James (Consultant) 2:00-3:30 Session 28: Political Economy of Pension Reform Initial conditions influencing the probability of structural reform: ambitiousness of the reform, existing implicit pension debt, coverage of the existing system, government spending on pensions, history of incremental reforms, preexisting funded plans. Approaches to maximize the probability of enacting a reform. Approaches to maximize the probability of implementing a reform. What can we learn from the experience of reforms? Robert Holzmann (World Bank) 3:30-4:00 Coffee Break 4:00-6:00 Group Projects - 12 -
8:30-9:00 Breakfast Day 9: Special Issues Thursday, November 18 9:00-10:30 Session 29: Pensions & the Financial Crisis Effects of declines in asset values and changes in revenue flows on defined benefit pension schemes Projected effects of the crisis in four stylized cases Policy responses in the face of the crisis Richard Hinz (World Bank) and Edward Whitehouse (OECD) 10:30- Coffee Break -12:30 Session 30: Pension Reform Challenges and Trends in South Asia Common characteristics demographic and economic Characteristics of existing policies and institutions Reform needs and challenges Reform options undertaken and under consideration Robert Palacios (World Bank) 12:30-2:00 Lunch Break 2:00-3:00 Pensions Olympics 3:00-3:30 Coffee Break 3:30-5:30 Session 31: Presentation of Proposed Reform Programs Groups A, B, C Course Participants. Chair: Mark Dorfman (World Bank) 6:00-9:00 Closing Dinner - 13 -
Day 10: Presentation of Group Reform Programs 9:00-10:15 10:15-10:45 10:45-12:00 12:00-1:00 Friday, November 19 Presentation of Proposed Reform Programs Groups D and E Course Participants. Chair: Mark Dorfman (World Bank) Coffee Break Presentation of Proposed Reform Programs Groups F and G Course Participants. Chair: Mark Dorfman (World Bank) Closing Session Summary of Key Points and Conclusions Presentation of Course Certificates Course Evaluations - 14 -