Joint report on Trade Union IMF World Bank Meeting on Pension Reform Washington DC, 8-9 March 2010

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Joint report on Trade Union IMF World Bank Meeting on Pension Reform Washington DC, 8-9 March 2010 In March 2010, trade union and World Bank and IMF (hereafter International Financial Institutions, IFI) representatives met to discuss the issue of pension system reform. The day and a half long thematic meeting was held as part of the regular trade union-ifi dialogue, as established under the 2002 protocol. The meeting offered an important opportunity to review recent changes in World Bank policies on pension reform and to compare them with concerns expressed by the ITUC at a similar meeting in 2003 and subsequently. Other topics on the agenda included the impact of the financial crises on pensions and pension reform initiatives, an exchange of technical perspectives on models for pension reform from both the World Bank and International Labour Organization (ILO), and an assessment of the level of engagement of both IFIs with trade unions concerning changes to pensions systems that have a direct impact on workers. I. Conceptual Framework of World Bank Pension Reform Richard Hinz, the leader of the Pensions Team in the World Banks Social Protection unit presented the Banks Conceptual Framework for its pension work that was published in 2008. This policy framework emphasizes that pension reform is best approached as a process, rather than a product. The Bank s pension policy framework is based on evaluating the extent that any system design is able to achieve poverty alleviation and income smoothing in a robust and sustainable manner that considers the particular circumstances of any country. A major consideration in undertaking this evaluation is the capacity of any system to effectively manage the various types of risks that are relevant to each set of conditions. This approach has led the bank to advocate a multi-pillar framework that considers various combinations of the pillars to be appropriate to different circumstances. The Bank continues to direct its efforts toward evidence-based policy and is working to define appropriate benchmarks and to integrate them into existing models and database. Heinz Rudolph of the World Bank Private Sector Development unit addressed the current performance of some pension systems that had undergone Bank-guided reforms, noting that at the time of many of these reforms, there was often a lack of what the Bank now identifies as enabling conditions for the introduction of 2 nd pillar funds. The Bank presented its view of conditions that are necessary and conditions that are desirable for 2 nd pillar reforms. Peter Bakvis, director of the ITUC/Global Unions Washington Office, discussed trade unions efforts to engage on the development of Bank pension reform policy and the union perspective on the Bank s policy changes. Since the 2003 meeting, at which the Bank agreed to consult more frequently with trade unions, 1

the ITUC/Global Unions office has been contacted only one time concerning a reform and consultations of unions at the national level have been inconsistent. The ITUC was concerned that the Bank had continued to advocate 2 nd pillar pension reforms in countries where capital markets were unprepared, a criticism shared by the Bank s own internal evaluation of its performance in 2006. Trade unions remain concerned about the very high administrative costs charged by privately administered pension funds (and their erosive effect on the rate of return) and the negative effects of financial market volatility. Elaine Fultz, consultant to the ITUC, identified six key issues of contention: (1) the lack of sound economic justification for the Bank s preference for a multi-pillar system, as analyzed by pension economists Nicholas Barr and Peter Diamond; (2) the Bank s assertion that the financial crisis increases the need for a multi-pillar system, which should be reformulated to clarify the increased need for the first pillar in the multi-pillar model; (3) the questionable assertion that inflation indexation of benefits is international best practice ; (4) the problem of continuing high administrative charges by private funds and the need for the Bank assistance in limiting these; (5) the delay in defining private benefit packages across Central Europe; and (6) the need for the Bank help with damage control in countries that did not meet the Bank s own pre-requisite conditions for reform. In the discussion, the World Bank described their approach to pension systems as one that has evolved in response to experience and that is in each national case tailored to a number of variables. A Bank representative agreed with the trade union observation that when conditions warrant 2 nd pillar pension funds could be operated on a defined benefit (DB) basis and that pension and other types of social insurance programs are best designed and operated in an integrated framework. The Bank representative agreed with the need to give attention to the administrative charges imposed by private funds and emphasized the government s central role in oversight of these funds. The ITUC expressed the view that the Bank had not sufficiently advised governments about the financial risks of the 2 nd pillar funds, and that governments choosing to compensate members for the decline in assets values in are essentially left with the responsibility of bailing out the privatized systems. II. Ensuring Adequate Old-age income Support in Post-Crisis Recovery Period Richard Hinz discussed the impacts of the financial crisis on PAYGO systems. The recession had reduced the level of contribution income thus creating potentially severe short-term financing problems in some countries. However, the Bank s modeling work on the possible longer term effects of the crisis on pension system financing has indicated that these are less consequential over the long term than the challenges imposed by more fundamental demographic changes. The World Bank s analysis indicates that the greatest impact in term so fiscal sustainability of systems can be achieved by through parametric changes including: (1) raising the age of retirement; and (2) switching to price instead of wage indexation of benefits. The Bank continues to view PAYGO defined benefit systems and an integral element of multi-pillar pension systems, but believes that many will require structural reforms to ensure fiscally sustainability. Ben Clements of the Fiscal Affairs Department of the IMF, discussed the impact of the crisis on national fiscal accounts, the additional fiscal challenge of age-related spending (healthcare & pensions), and policy options for pension reform. Most advanced economies will require large fiscal adjustments in order to 2

reduce high government debt. While the financial crisis had an adverse impact on pension funds, recovery is well underway and can be expected to continue with the recovery of asset markets. While age-related spending will increase fiscal pressures, pension costs increases will be modest compared to those associated with health care because pension adjustments have already been made in many countries. An important challenge is the need to increase pension coverage in emerging countries. Michael Cichon, pension specialist at the ILO, asserted that all the Bank-supported reforms could have been successfully achieved through parametric rather than paradigmatic reforms. He stated that workers aged 50-65 at the time of the crisis would not fully recover lost savings by the time of retirement. Pension systems should be discussed in conjunction with other forms of social spending, and it is crucial to involve affected people, including workers, in the design of pension reform proposals. He cautioned that while shifting from wage to price indexation of pensions may be effective in limiting costs, it could lead to significant deterioration of retirees living standards relative to the rest of the population. ILO s work on 2 nd pillars includes innovative ideas for guaranteeing benefits and for moving to notional defined contribution systems (NDCs), in accordance with the principles in ILO Convention No. 102. Elaine Fultz noted that the crisis had brought a loss of revenue to all pension systems and had made evident certain pre-existing problems in 2 nd pillar systems. In many cases, PAYGO or 1 st pillar systems entered the crisis in a weakened state because they had been cannibalized by diverting contribution revenues to the new privately managed individual savings accounts. The problem of high administrative fees charged by private funds also pre-dates the crisis. As seen in Poland, pension contributions are frequently given to private funds that in turn use them to purchase government bonds, creating a circular process where high private administrative charges weaken the rate of return. Some current reforms will cause drastic reductions in wage replacement rates, in some cases causing benefits to fall below the minimum standards laid out in ILO conventions. She recommended that the Bank work to stabilize current pension systems and address problems created by following the Bank policy advice in conditions where the necessary preconditions did not exist. In the discussion, trade unions raised the question of possible future crises. The Bank responded that given the inherent fluctuation of markets, the primary goal should be to protect retirees from absorbing the losses from short-term market downturns. The ITUC drew attention to the difference between the Bank and the ILO regarding a guaranteed return. The World Bank shares the goal of achieving adequate returns but prefers to base its approach in portfolio arrangements and risk-management, while the ILO favours a rights-based approach which gives workers a legal entitlement to certain benefits. III. Experience in Central and Eastern Europe Maria Svorenova of the Confederation of Trade Unions of the Slovak Republic (KOZSR) and Anita Schwarz of the World Bank discussed the Bank-supported reforms in the Slovak Republic in 2003-2004, which included the reform of the 1 st pillar and the creation of a mandatory 2 nd pillar. In the following years the system saw unexpectedly high membership in the second pillar by the group of workers who were given a one time choice to join it or not. Because the new second pillar was funded by diverting contribution revenues from the public pension system, this increased the large deficit of the 1 st pillar. Subsequently the government allowed, and in some cases strongly encouraged, workers to return to the 3

first pillar alone, but few exercised this option. In the wake of the financial crisis, trade unions feel there is a need to redress the individual losses incurred in both 1 st and 2 nd pillars, and to further reduce administrative fees on 2 nd pillars. From the World Bank perspective, the 1 st pillar deficit was unsustainable before the reforms, due to a number of reasons, including the aging of the population, the relatively generous benefits provided at relatively young ages, the decline in the number of contributors, and the need to rein in long run fiscal deficits as a member of the Euro zone. In the absence of further reform, the first pillar deficits after the 2003 reforms would have exceeded 5% of GDP in the pension system alone, making it difficult to maintain the Maastricht criteria for deficits below 3% of GDP. The addition of the second pillar in 2005, increased the short run deficit by a percentage point from less than.5% of GDP initially, but would result in long run deficits of less than 4% of GDP. Further increases in retirement age as life expectancy increased would have brought the pension system deficits down further. The current Government has tried repeatedly to provide options to reverse the second pillar, but individual participants have not complied, leaving a fairly large percentage of the working age population under the second pillar. The Slovakian union representative questioned the Bank s promotion in her country of the Chilean model for pension reform, which in 2003 had proven notably unsuccessful. She mentioned in particular a Bank financed study visit to Chile. The Bank representative disagreed with this appraisal of the Chilean system and stated that it was the government s choice as to the countries to which it organized study tours. Asta Zviniene of the World Bank and Romas Lazutka, professor at Vilnius University and advisor to Lithuanian unions, spoke about reforms to the Lithuanian pension system in the context of renewed discussion of fiscal restraint between the country and the Bank. The World Bank feels that although the current system is close to fiscal balance, Lithuania is facing a demographic time bomb due to its particularly low fertility rates. It believes increasing the retirement age may be one of the better of a series of (bad) options, possibly to be done in tandem with a shift to pure price indexation of pensions. The debate on the retirement age reform in Lithuania is not yet definite and still under discussion. Lazutka analyzed the expectations and outcomes of prior Lithuanian pension reforms and showed that they varied greatly depending on your political view. He identified two possible proposals for future reforms: fully privatizing the 2 nd pillar by requiring workers to make additional contributions to finance it (rather than diverting public pension contributions to the second pillar), or a parametric reform of the 2 nd pillar. Drenka Vukovic, professor at Belgrade University and advisor to Nezavisnost, and Anita Schwartz of the World Bank discussed two rounds of pension reforms in Serbia, in 2001-2003 and in 2005. The first mainly consisted of parametric reforms to the 1 st pillar PAYGO system (indexing pensions to a combination of wage growth and inflation). A 2 nd pillar was not introduced due to unfeasible transition costs and although a 3 rd pillar (voluntary private savings) was strongly advocated by the Bank, the legislative framework was not completely designed, and few workers have exercised this option to date. While unions were included in the design of the reform, they had little impact on the outcomes and they felt the reforms have had little positive effect. Noting that the other PAYGO reforms had been unsuccessful in reducing the pension deficit, in 2005 the Bank supported moving indexation entirely to inflation and increasing the retirement age, which brought a major improvement in fiscal sustainability. However, 2007 brought strong growth in wages and weaker growth of pensions (resulting from the new form of indexation) and the Government boosted pensions to keep pace with the improving living 4

standard of workers. The Bank believes that further changes to the system are necessary to make it sustainable but does not support the creation of a 2 nd pillar due to the high government deficit. In the discussion it was observed that the widespread underreporting of wages can give a false impression of pension levels relative to wages. The ITUC questioned the validity of raising retirement age in the context of high unemployment, specifically in Lithuania. The Bank responded that a further increase could be postponed until the effects of the current crisis have passed. IV. Experience in Latin America Ruben Garrido of Central de los Trabajadores Argentinos (CTA) and Rafael Rofman of the World Bank both characterized the pension reform process in Argentina as uneven, lacking a clear, long-term vision, and enacted by political decisions without broad support. The Bank recognized that while the 1990s reform could have been successful in controlling long term costs, it did not succeed in the areas of coverage or adequacy. Although the current re-nationalized system appears to be balanced and has improved coverage, its fiscal sustainability is unclear (because of a lack of quality data, and unpredictable political actions). Garrido pointed out that the Bank-supported reform was implemented with a number of assumptions about supportive policies and actions, which did not materialize. Administrative charges by private funds were high and not linked to fund investment performance, and the funds lost significant value in 2008 before being nationalized. Most of the benefits to pensioners in the multi-pillar system were actually paid out by the public system. Trade unions believe that social security protection cannot be left to market forces. CTA has submitted proposals for a universal pillar, along with a public, social insurance pillar. Both the Bank and trade unions spoke about the importance of social dialogue for a successful, stable agreement. Gonzalo Reyes of the World Bank identified the challenges faced in the Chilean pension system as coverage, costs (continuing high administrative fees), and risk-return ratios. In 2002, Bank-supported reforms created a series of multi-funds, consisting of five risk classes and a plan that scheduled the level of risk of portfolio holdings in which savings were invested would decrease as the age of the worker increases. Participants were attracted to the riskiest funds, which brought severe losses of savings during the financial crisis. However, given the life cycle design of the default option and the fact that the riskiest fund is closed to participants who are less than 10 years away from the legal retirement age, participants nearing retirement were less affected by these losses. 2 nd generation pension reform was a consultative process, and included trade unions. It created a solidarity pillar for the lowest 60% of income-earners, which provides benefits that complement contributory pensions in an incentive compatible design, and established a gradual process to extend mandatory contributions for self-employed individuals. Private funds must engage in a bidding process for new members, which has had some success in lowering administrative fees. (There was no worker presentation on this panel, as the Chilean trade union representative was unable to attend the meeting due to the major earthquake in Chile.) Rodrigo Villalta, from Confederación de Trabajadores Rerum Novarum (CTRN) of Costa Rica, and Gonzalo Reyes discussed the pension system reforms in Costa Rica, which have involved trade union consultations and a key ILO role. In 1998 the pension reform law was the only legislation unanimously agreed upon by the political forum. The structural reform was enacted in 2001, creating a supplementary 5

2 nd pillar, which was organized as individual accounts with a 4.25% contribution rate. In 2005, the Defined Benefit portion of the system underwent parametric reforms. However, challenges remain. Villalta raised the issue of diminished youth opportunities, as older workers are unable to retire. He also noted the issue of low pension contributions from state employers (which should pay the double contribution of both employer and government). Workers have negotiated an increased contribution rate from both the state (1.5%) and workers (1%) which has had a big impact. Reyes added that remaining challenges include incorporating self-employed workers. V. Low-Income Countries Mark Dorfman, Senior Economist at the World Bank reviewed some of the key challenges for pension provision in low income countries (LICs) including policy designs which may not be fully appropriate for local economic conditions, designs which create barriers to labour mobility, poorly regulated occupational pension provisions and, in some cases a need for better design and targeting of social pensions. Mr. Dorfman suggested that the World Bank had placed considerable strategic importance on the needs and appropriate reform measures which encourage broader coverage, including recent piloting of matching defined-contribution schemes, occupational and personal savings arrangements, and non-contributory social pensions. He pointed out the application of different criteria for evaluating existing schemes and reform options, including adequacy, sustainability, predictability and equitability as well as affordability in LICs. ILO representative Michel Cichon reviewed the key policy challenges of elderly living in social insecurity, suggesting that social security transfers are a pivotal tool to combat poverty and social exclusion. In this context, he pointed out the key policy challenge to increase effective coverage. Mr. Cichon reviewed the nine joint initiatives adopted by the UN Chief Executives Board in 2009, including agreement on a Social Protection Floor initiative. The Social Protection Floor Initiative includes a basic set of essential social rights and transfers and access to essential services. He suggested that the social transfer component of the social protection floor could consist of four essential social security guarantees. ILO analysis has found that a number of countries are already providing basic guarantees and therefore the marginal cost could be financed. He reviewed potential financing strategies for such social security guarantees. Mr. Cichon pointed out two dimensions of social security: (i) four essential social guarantees; and (ii) promotion of benefits and levels in the formal economy with the highest possible coverage and widest possible scope. Finally, Mr. Cichon concluded by reviewing his assessment of strategic challenges for national implementation processes and pointed out that the ILO over time has adjusted its mandate protection for all not just in the formal sector. Kwasi Adu-Amankwah, General Secretary of ITUC-Africa, discussed the growing emphasis on social security as part of the increased attention to fair globalization. The initiative to establish a Global Social Floor has developed from the past decade of development discussion, which has revolved around the concern for basic social protection in low-income countries. He spoke of the specific experience of Ghana, where significant work on improving its national pension system has taken place in the past decade. There is a 1 st pillar social security scheme which includes health insurance although less than 10% of the labour force is covered. There is also a voluntary occupational scheme or 3 rd pillar, incentivized by preferential tax treatment. In the discussion period, Elaine Fultz emphasized the fundamental importance of government accountability in the functioning of any pension system. The ILO described some of its efforts to build 6

capacity in this area, working through country engagements as well as procedural work on specific projects, always through tripartite stakeholder discussions. The World Bank said that it also has worked to improve the governance of public and private pension systems and pointed out the efforts of the OECD and ISSA to develop common principles. The Bank pointed out the importance of oversight, disclosure and grievance arbitration mechanisms to support transparency and accountability. The Bank clearly shares the same old-age income protection objectives as the ILO though places primary importance on ensuring that such protection also aligns itself with a Country Strategy and a sustainable fiscal framework at a country level. A trade union representative made a comment about the impact of differing life expectancies, notably the fact that low-income people tend to have lower life expectancies, and suggested that the Bank should incorporate these differences in pension calculations in order to avoid inherent inequality of treatment of different categories of beneficiaries. VI. Pension Reform Design David Robalino of the World Bank SPL discussed the typology of PAYGO systems, typical problems, best practices in terms of design and the coverage gap. He noted that defined benefit, points systems, and NDCs are mathematically identical, if well-designed. A key feature in the design of the systems is the implicit rate of return on contributions. To be sustainable, the implicit rate of return needs to be close to the growth rate of the covered average wage; benefit formulas and eligibility conditions should be reviewed to ensure that. It is also important to have reserves to smooth the impacts of macroeconomic shocks and demographic transitions. Finally it is important to deal with two related problems: redistribution and incentives. Redistribution in Defined Benefit PAYGO systems is pervasive but it is not transparent and it can be regressive. Redistribution can also distort incentives and affect decisions about enrollment, payment of contributions, and retirement. The Bank supports instead PAYG systems with explicit redistribution targeted to those individuals with not or limited savings capacity and financed through general revenues. It is also important to reduce discretion, and associated uncertainty, in the way the parameters of the system are adjusted. Heinz Rudolph discussed the World Bank approach to 2 nd pillar design, noting that ten years ago there was a perception that a single system would meet all individual needs and that competition among different pension companies would bring different portfolios which would then result in a process of selection. While there was the idea that different kinds of workers would hold different private portfolios, in fact, the portfolios were all very similar. This was experienced through the multi-funds reform in Chile. Learning from the Chilean experience, the revised model is being replicated in Peru and Colombia this year and is under discussion in Slovakia, Estonia, and Poland. The Bank has recognized however two important challenges: the assumption of a high level of pension literacy among workers, and the expectation that private funds will compete for members. Mr. Rudolph stressed the importance of education in the field of financial literacy (e.g. the financial literacy TF makes a strong effort in this direction). However, we still need more information on what works and what doesn t, he reiterated. With regards to high private administrative fees, Mr. Rudolph said, one either assumes competition works, or one doesn t and therefore imposes fee caps. It appears as though the regulation of fees is driven by national politics. Future World Bank analysis will try to understand pension management companies and what level of fees may be considered reasonable. 7

Ben Clements considered that well-designed and -implemented economic policies are the best way to ensure protection for the elderly. With regards to governments age-related spending, inadequate coverage and high costs are often a problem. Therefore, the preferred option for pension reform remains raising retirement ages. Reduction of benefits is also an option, but this poses the risk that benefits will become inadequate and poverty rates will rise among the elderly, while increasing contribution rates is politically difficult. Clements recommended the development of a de-politicized model, where adjustments are made almost automatically to align with fiscal constraints. Frank Hoffer, a representative from the ILO-ACTRAV said that there is a need to close the longevity gap between poor and rich not through pension policy, but in equitable access to resources, nutrition, and social protection. He raised questions about financial market risks: Are returns on investments above GDP growth rate sustainable in the long run? Is it reasonable to expect that capital markets will consistently outpace wage and productivity growth? Is it possible to design a private system that protects workers against the risks inherent in private management and investment without a state guarantee? In assessing pension system performance, Hoffer suggests measuring the delivery of these systems in the context of their primary purpose which is protecting workers, not developing financial markets. Hoffer sees the way forward in adding horizontal extension through a universal tax funded social security floor. Chris Driessen of the Netherlands trade union federation FNV spoke of the impact of the financial crisis on the pension system in his country. He noted that the crisis had reduced the coverage degree (ratio of assets to liabilities) of the 2 nd pillar, but that it has made evident deeper structural problems of the pension system, one of which is coming financial imbalances due to an ageing workforce. Dutch unions have favoured introducing flexible retirement ages and more investments in the labour market for older employees rather than an across-the-board increase of the retirement age. Conclusion Arup Banerjee, Sector Director of the World Bank SPL unit, summarized the meetings as a very fruitful and important exchange and stated in his closing remarks his view that the trade unions and the WB agree more than they disagree. Areas of agreement are in the goals for social protection, and the diagnosis of challenges. Like trade unions, the Bank believes that it is essential that pension systems produce meaningful and adequate income replacement. The Bank and unions also agree in the diagnosis of the problem and the identification of the challenges. Both sides recognize that the informality of work, the globalization and commodification of labour and labour migration all have implications for pension systems. The Bank also sees agreement about the difficulty for parametric reforms to address the ageing problem, the importance of avoiding unintended redistribution, and the recognition of the range of issues that affect pension institutions (including governance and transparency). Mr. Banerjee noted differences in perspectives on the use of funded systems, assessments of the costs and benefits of political and economic reforms, and on secondary objectives of pension reform (such as the importance of developing capital markets). There are also different views on market processes, in particular, whether they are capable of driving down the administrative costs charged by private funds. Noting the difference in organizational approaches ( rights-based as opposed to country-specific ), Banerjee recommended that 8

future discussion evolve to a broader evidence base. Overall, he concluded that the WB, the ILO, and the trade unions are closer on all these issues than a decade ago. Michel Cichon noted that the World Bank and the ILO are in a constant process of convergence, but always coming to a level of persistent disagreement, be it on a narrower and more refined range of issues. The organizational perspectives agree about the importance of universal coverage, adequacy, and sustainability of pension systems, but disagree about the levels of these. The organizations both recognize that PAYGO systems have challenges, and agree that there is a need for some form of old-age guarantee and to secure an adequate rate of return. Where they differ is in designing strategies to reach these goals. There is also continued disagreement about the level of risks that workers are, or should be, exposed to by funded schemes, the relative size of various pillars, as well as adherence to the basic coverage principles outlined in ILO Convention No.102. With regards to future action, the ILO suggested exchanges with the Bank regarding the process of establishing and securing adequate rates of return from pension systems. Pragmatic action could be jointly undertaken to improve transparency in reform processes, and to invest in the education and training of capable people. Peter Bakvis noted a number of positive changes in the World Bank approach since the 2003 meeting, but also important issues of continuing concern. Trade unions do not share the World Bank s optimism about the global financial system, noting that fragilities that were in existence but not widely evident in the precrisis situation were brought out by the crisis. In the absence of substantial financial market regulatory reforms, it should not be assumed that future crises will not occur. The Bank acknowledges the deep lack of understanding of risks in workers investment choices, but admits it does not have answers on how to raise this financial literacy. Many of the countries that have scaled down 2 nd pillars due to the financial crisis had undergone pension reforms that were characterized by a lack of social consensus, demonstrating the importance of the consultative process in providing more durable models, which ITUC hopes will be a major message going forward. The ITUC suggests that the Bank engage in further discussion regarding legislating caps on administrative fees, strategies for structuring private system benefits to make annuities more affordable, and evaluating the effects of pure price indexation of pensions. The ITUC feels that there is a serious need for corrective action for failed cases where reforms were implemented without the pre-requisite enabling conditions, and a need for improved communication systems to ensure that Bank staff adheres to the new guidelines. The ITUC requested a formal directive from the Bank to consult trade unions in the reform design phase, as well as at later stages. Finally, the ITUC looks forward to improved cooperation between the ILO and the World Bank on pension reforms. The IMF noted that while it is not deeply involved in the details of pension reform design, it offers its perspective on fiscal issues. Certainly pension issues will be on the agenda in the years ahead. The IMF has had increasing involvement with trade unions, particularly at the international level, and looking forward, intentions for improved involvement at the country level and the G-20 level. Annex 1: Program Annex 2: Participants List 9

TECHNICAL MEETINGS ON PENSION REFORM ITUC/GLOBAL UNIONS AND THE IFIS 8-9 March 2010 Washington, DC World Bank, J Building (701 18th St. NW) Meeting Room JB1-075 Meeting languages: English, Spanish AGENDA Monday 8 March, World Bank J Building (701 18th Street NW) Room JB1-075 8:30 Light Breakfast 09:00-09:30 Preparatory Session for Trade Union Participants. 09:30-09:45 Meeting Opening Introductory Remarks: Peter Bakvis (ITUC/Global Unions), Arup Banerji (World Bank), Vasuki Shastry (IMF) 09:45-11:15 Session 1: Update on the World Banks Pension Reform Policy Framework Since 2003 TU- IFI meeting World Bank speakers present for 30 minutes and trade union speakers present for 30 minutes, to be followed by general discussion. Speakers will address the following issues: 1. In what ways has the World Bank 2008 conceptual framework on pension reform policy integrated the recommendations of the 2006 IEG report? 2. How has the Banks perspective on the conditions under which funded pillars are appropriate and the design of funded pillars evolved? 3. What are the key strategic themes of the Bank s work on pension reform going forward? Chair: Arup Banerji (WB) Speakers: Richard Hinz, Heinz Rudolph (WB), Peter Bakvis (ITUC/Global Unions), Elaine Fultz (advisor to ITUC) 11:15-11:30 Coffee Break 11:30-13:00 Session 2: Ensuring Adequate Old-age Income Support in the Post-crisis Recovery Period Speakers from the World Bank, IMF, ILO and Trade Unions will each present for 15 minutes followed by a general discussion. The speakers will address the following issues: 1. What has been the impact of the financial crisis on pension systems and what may be the long-term effects? 1

2. What have been the country responses to the crisis and how have the World Bank and the IMF been involved in supporting long-term reforms including responding to the crisis? 3. What are the ILO and trade unions perspectives in adjustments to pension systems required in response to the financial crisis? Chair: TBD (Trade Unions) Speakers: Richard Hinz (WB), Ben Clements (IMF Fiscal Affairs), Michael Cichon (ILO), Elaine Fultz (advisor to ITUC) 13:00-14:00 Light Lunch (served outside conference room) 14:00-15:45 Session 3: Recent Experience of Pension Reforms in Central and Eastern Europe ** translation from Serbian to English to be provided by IMF ** 15:45-16:00 Coffee Break Country cases of pension reforms, including the World Bank's role in the reforms (if any), will be presented for: Slovakia, Lithuania and Serbia. Each case will be addressed by both a World Bank and a ITUC speaker for 10 minutes each to be followed by a general discussion. The speakers will address: 1. Description of the pre-reform system, including identification of specific problems. 2. What did the reform entail? 3. What were the pros and cons, expected and unexpected effects of the reform? The case studies will of regional pension reform issues. Chair: Tamar Manuelyan Atinc (World Bank). Speakers: SLOVAKIA: Maria Svorenova (KOZSR), Anita Schwarz (WB); LITHUANIA: Asta Zviniene (WB), Romas Lazutka (Vilnius University and advisor to unions); SERBIA: Drenka Vukovic (Belgrade University & Advisor to Nezavisnost), Anita Schwarz (WB) 16:00-17:45 Session 4: Experiences of Pension Reform in Latin America Country cases of pension reforms, including the World Bank's role in the reforms (if any), will be presented for: Chile, Costa Rica and Argentina. Each case will be addressed by both a WB and a TU speaker for minute each, to be followed by a general discussion. Speakers will address: 1. Description of the pre-reform system, including identification of specific problems. 2. What did the reform entail? 3. What were the pros and cons, expected and unexpected effects of the reform? Chair: Helena Ribe (World Bank). Speakers: CHILE: Gonzalo Reyes (WB); Héctor Sandoval (Central Unitaria de Trabajadores de Chile CUT); COSTA RICA: Rodrigo Villalta Delgado (Confederación de Trabajadores Rerum Novarum CTRN), Gonzalo Reyes (WB); 2

ARGENTINA: Rafael Rofman (WB); Rubén Garrido (Central de los Trabajadores Argentinos CTA) Note: The World Bank will organize a cocktail reception outside meeting lobby, to directly follow the last session. Tuesday 9 March, World Bank J Building (701 18th Street NW) Room JB1-075 8:30 Light Breakfast 09:00-10:30 Session 5: Challenges and Experiences of Pension Reform in Low-income Countries Speakers will present an overview of what are perceived as the key themes in low-income settings including Sub-Saharan Africa, and South and East Asia. Representatives from the World Bank, ILO, and ITUC will each present for 20 minutes, to be followed by a general discussion. Topics will include: 1. Common challenges for coverage, adequacy and equity in low-income countries 2. Solvency and operational efficiency of pension systems and provident funds in lowincome countries 10:30-10:45 Coffee Break Chair: Richard Hinz (World Bank) Speakers: Antony Randle (WB), Mark Dorfman (WB), Michael Cichon (ILO), Kwasi Adu- Amankwah (ITUC-Africa). 10:45-12:30 Session 6: Pension Reform Design Representatives from the WB, IMF, ILO, ITUC will each speak for 15 minutes, to be followed by a general discussion. Speakers will address the following issues: 1. What are the kinds of parametric reforms the IMF, World Bank and ILO are supporting to improve adequacy, affordability and sustainability? 2. How are issues of equity and redistribution considered in the design of pension systems? 3. What has been the fiscal impact of transition costs and what changes in pension schemes have been made to respond to them? 4. Where does the impact on financial market development feature in institutions advice on pension reforms? 5. What has been the experience (risk, returns, income replacement, administrative efficiency, fiscal) with the functioning of 2 nd pillar pension schemes in client countries and how have the funded 2 nd pillar pension schemes been modified? Chair: TBD (Trade Union) Speakers: David Robalino (WB), Heinz Rudolph (WB), Ben Clements (IMF), Frank Hoffer (ILO-ACTRAV), Chris Driessen (FNV-Nederlands) 3

12:30-13:00 Closing Comments and Summary of Common Themes: Arup Banerji (World Bank), Michael Cichon (ILO), Peter Bakvis (ITUC/Global Unions), Vasuki Shastry (IMF) 13:00-14:30 Light Lunch (served outside conference room) provided by World Bank (Note: Interim meeting to follow, in same room, beginning after lunch at 14:30) 4