World Bank Core Course on Pensions November 6 to 17, 2006 Washington, D.C. MC Building Floor C2 COURSE AGENDA This course aims to provide policymakers and other stakeholders in developing countries with an overview of the approaches to analyzing pension systems and reform options. It provides a foundation for analyzing existing pension systems and developing reform options for policies and institutions. 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: formal instructional presentations on the key approaches to the design and reform of public and private pension systems and institutional development challenges; 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.
Monday, November 6 8:30-9:00 Registration 9:00-10:30 Welcome to Participants Opening Remarks Objectives, Format, Logistics Open Discussion of by Course Participants of Expectations and Desired Results Robert Holzmann (WB)/ Bruno Laporte (WBI) 11:00-12:30 Session 1: International Pension Objectives, Challenges and Reform Issues Objectives of Public and Private Pension Systems. Challenges to achieve adequacy, sustainability, affordability, and robustness. Dimensions of Reform: Changes to existing parameters; funding; risk-sharing; structural reforms. Role of Governments, employers, employees, families and mix of risk-sharing. Robert Holzmann (WB) LUNCH 2:00-3:30 Session 2: Pension Reform Trends Around the World Aging Changes in the Nature and Form of Public Promises Changes in the Nature and Form of Corporate Promises Fiscal constraints and challenges Funding Public-private sector roles Governance Addressing the coverage gap Robert Palacios (WB) / Edward Whitehouse (OECD) 4:00-5:30 Session 3: A Debate over the Reform Proposal for the US Social Security System Larry Thompson (The Urban Institute) Andrew Biggs (US Social Security Administration) Moderator: Robert Holzmann (WB) 6:00-8:00 Opening Reception for Participants -2-
-3- Tuesday, November 7 8:30-9:00 Coffee 9:00-10:30 Session 4: Pension Concepts and Identities Demographic parameters Economic parameters 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. Relationship between input parameters and system qualifying conditions and benefits Tatyana Bogmolova (WB) 11:00- Session 5: Mapping out a Reform - The Diagnostic Process 12:30 Reviewing the Current and Desired Objectives of the Pension System Income replacement Coinsurance of risks Minimum income support/insurance against vulnerability Sustainability Intergenerational resource transfers Savings mobilization Reform of oversight Existing structure of modalities, institutions and instruments A methodology for determining if the structure is fulfilling the desired objectives constructing a projection baseline Mapping out reform options Parametric and structural reform options-responsibility and risk Financing reform options Administrative reforms Reform of oversight Edward Whitehouse (OECD) LUNCH 2:00-3:30 Session 6: Parametric Reforms Objectives, 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 (WB) 4:00-5:30 Workshop Session 1 : a) Designing a Reform Program and Implementation Plan Constitution of six break-out groups for the purpose of discussion and design of pension reform programs and implementation plans. Discussion of the reform programs and methodology for preparation. b) Parametric Reforms Systematic review of key parametric reform objectives and options in selected countries in break-out groups. Anita Schwarz (WB), Robert Palacios (WB), David Robalino (WB), Gregorio Impavido (WB), Gustavo Demarco (WB), Mark Dorfman (WB)
Wednesday, November 8 8:30-9:00 Coffee 9:00-10:30 Session 7: Civil Service Reform Options and Trends 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. Edward Whitehouse (OECD)/Robert Palacios (WB) 11:00-11:45 Session 8: Case Study- Civil Service Reform in the USA: The Thrift Savings Plan Antecedents Achieving efficiency of account administration Achieving efficiency in investment management Ensuring good governance Jim Petrick (Thrift Savings Plan, USA) 11:45-12:30 Workshop Session 2: Civil Service Reform Applying civil service reform principles to reform programs in break-out sessions. Jim Petrick (Thrift Savings Plan, USA), Edward Whitehouse (OECD), Robert Palacios (WB) 12:30-14:00 Optional Session: Pensions Panorama: Retirement-Income Systems in 53 countries Robert Holzmann (WB) / Edward Whitehouse (OECD) - Room J1-150 EARLY DISMISSAL -4-
Thursday, November 9 8:30-9:00 Coffee 9:00-10:30 Session 9: Funded Schemes and 2 nd Pillar Reforms Funded vs. Unfunded Pension Systems: Advantages and disadvantages Aging in funded and unfunded pension systems Structure of funded systems. Multipillar options Enabling conditions for introducing funded schemes Necessary conditions for privately-managed funded schemes Options for funding transition costs Anita Schwarz (WB) 11:00-12:30 Session 10: Non-financial (Notional) Defined Contribution Schemes Technical framework Pros and cons, benefits and risks Results to date Robert Holzmann (WB)/David Robalino (WB) LUNCH 2:00-3:30 Workshop Session 3: Structural Reforms including the introduction of funded schemes and NDC Break-out sessions reviewing structural reforms, funding options and NDC Anita Schwarz (WB), Gustavo Demarco (WB), Mark Dorfman (WB) 4:00-4:45 Session 11: Case Study of Reforms in Funded Schemes: Chile Eduardo Fajnzylber, Superintendencia de AFP, Chile (via videoconference) 4:45:-5:30 Workshop Session 3: Structural Reforms including the introduction of funded schemes and NDC Cont. Anita Schwarz (WB), Gustavo Demarco (WB), Mark Dorfman (WB) -5-
Friday, November 10 8:30-9:00 Coffee 9:00-10:30 Session 12: Voluntary Pension Schemes and the Enabling Environment Alternative vehicles to extend old-age income protection for low-income people and countries. Minimum enabling conditions for corporate and individual voluntary pension schemes. Regulation and oversight of voluntary schemes. Use of the infrastructure for voluntary pension schemes to support 1 st and 2 nd pillar reforms. Richard Hinz (WB)/ Mark Dorfman (WB) 11:00-12:30 Session 13: Regulatory Reform and Supervision Existing conditions- common law vs. Napoleonic code approaches; preexisting 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 Supervision of Pension Systems Different approaches and models on pension supervision Interface between Pensions and other financial market supervisors Integrated vs. specialized pension supervision Richard Hinz (WB)/ Alexander Fleming (WB) Workshop Session 4: Regulation and Supervision Concurrent sessions geared to the reform programs pursued by break-out groups. Richard Hinz (WB), Gustavo Demarco (WB), Mark Dorfman (WB)Richard Hinz (WB) LUNCH 2:00-3:30 Session 14: Pension Administration Design and Reform Options Institutional design O Centralized versus decentralized operation management o Public sector synergies and interfaces: uses of common platforms and infrastructure. o Cost-recovery models o Public accountability Operations and record-keeping o Personal identification: policy choices o Collection and reconciliation o Special provisions for unorganized and informal sector o DC schemes: investment accounting and reporting to members o Benefit payments IT systems o Procurement options and process o Mapping and mitigating various risks Lou Enoff (Consultant), Oleksiy Sluchynskyy (WB) 4:00-5:30 Session 15: Annuitization Requirements for development of private annuities markets Annuitization of public schemes- best practice parameters Phased withdrawal alternatives -6-
Insurance policies to cover longevity risks. Reflection on case studies to date. Roberto Rocha (WB) -7-
8:30-9:00 Coffee Monday, November 13 9:00-10:30 Session 16: Case Study of a Notional Defined Contribution Reform: The Case of Poland Agnieszka Chlon-Dominczak (Ministry of Labor, Poland via videoconference) 11:00-12:30 Session 17: Managing Public Pension Reserves Approaches towards the governance of mandatory public pension schemes which maximize incentives for prudence, professionalism and accountability. Governance infrastructure for investment management: Employment of Investment committees, Ingredients of sound investment policies, Elements of sound investment strategies, accountability of investment professionals. Establishing investment risk parameters consistent with pension liabilities Minimizing administrative and asset management costs Robert Palacios (WB) 2:00-3:30 Session 18: Funded Schemes: Fiscal Requirements and Interactions between Pensions and Financial Market Development Getting the Sequencing Right for Reform and Regulation Macroeconomic and fiscal requirements prior to and during the established of funded schemes Effects on Savings Growth and Duration Public Finance Effects Alberto Musalem (Financial Stability Center - Argentina.) 4:00-5:30 Session 19: Funded Schemes: Institutional Requirements for Financial Market Operation and Oversight to Achieve Financial Complementary Financial Market Development Operational requirements for intermediaries under funded schemes depth, liquidity, contestability. Sequencing support to the development of regulatory and supervisory capacity (banking, insurance, securities markets, pension regulation) Heinz Rudolf (WB) -8-
8:30-9:00 Coffee Tuesday, November 14 9:00-10:30 Session 20: Tax Treatment of Pensions Tax treatment options for pension contributions, accumulations and payouts Tension between savings mobilization objectives and regressive effects of tax arbitrage. Employment of caps on corporate and individual income deductibility Coordinating and reconciling data between tax and pension collections. Pros and cons of combining tax and pension collections Incentives for low-income savings mobilization tax credits, initial deposits in DC accounts Robert Gillingham (IMF) 11:00-12:30 Session 21: Disability and Survivorship Historical context the link between service retirement and disability. Strengths, weaknesses and best practices for public Strengths, weaknesses and enabling conditions for private insurance of disability. Moral hazards in disability coverage. Survivorship benefits: reconciling sustainable pension schemes with equitable survivorship benefits; treatment of multiple survivors and costs of annuitization. Robert Holzmann (WB), Gustavo Demarco (WB) 2:00-3:30 Session 22: Simulating baseline and reform option scenarios applying the Pension Reform Options Simulation Toolkit (PROST). 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. Yvonne Sin (WB) / Asta Zviniene (WB) 4:00-5:30 Workshop Session 5: Simulating baseline and reform option scenarios for a country case using PROST. This session will apply PROST to an actual country case to provide instruction on the process of completing and reconciling the input file for a baseline scenario; analyzing the results indicated in the baseline, simulating the impact of multiple parametric reforms; and simulating the impact of a structural reform scenario. The session will include analysis of the PROST outputs Asta Zviniene (WB)/Tatiana Bogomolova (WB) -9-
8:30-9:00 Coffee Wednesday, November 15 9:00-10:30 Session 23: Options and Constraints for Extending Coverage Conceptual issues: Relationship between enterprise and individual participation in formal pension schemes and participation in other aspects of the formal sector. Individual and enterprise incentives for partial and/or full participation. Policy options for encouraging participation. Case Study Robert Palacios (WB)/ Oleksiy Sluchynskyy (WB) (WB) 11:00-12:30 Session 24: Social Pensions Conceptual issues Fiscal context Weighing the support of the lifetime poor against other urgent development priorities Public resources as matching grants for private savings Targeting and means-testing Robert Palacios (WB) Margaret Grosh (WB) 1:00-2:00 Optional Session: Portfolio management of the World Bank Pension Plan Sudhir Rajkumar EARLY DISMISSAL - 10 -
8:30-9:00 Coffee Thursday, November 16 9:00-10:30 Session 25: The Political Economy of Pension Reforms 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? Steve Kay, Federal Reserve Bank of Atlanta/ Robert Holzmann (WB) 11:00-12:30 Session 26: Pension Olympics: A Review of Pension Reform Processes in selected countries Kazakhstan Singapore Argentina Poland Hungary LUNCH 2:00-3:30 Workshop Session 6: a) Policy measures to extend coverage; b) Introduction of NDC schemes; c) Strengthening the framework for the public or private provision of mandatory disability benefits. Concurrent sessions geared to the reform programs pursued by break-out groups. David Robalino (WB), Robert Palacios (WB), Mark Dorfman (WB), Gustavo Demarco (WB) 4:00-5:30 Workshop Session 7: Finalizing Group Reform Strategies Gustavo Demarco (WB), Mark Dorfman (WB) - 11 -
8:30-9:00 Coffee Friday, November 17 9:00-10:30 Presentation of proposed reform program Groups A,B and C. 11:00-12:30 Presentation of proposed reform program Groups C and D Summary of Key Points and conclusions 12:30-1:00 Closing Session Wrap-Up Session Course Evaluations EARLY DISMISSAL - 12 -