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Author: Dimitri Vittas
Publisher: World Bank Publications
ISBN: 8042911114
Category : Pension reform
Languages : en
Pages : 45
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Book Description
March 1998 Although controversial, investment and other draconian regulations for private pension funds are suitable for countries with weak capital markets and little tradition of private pension provision. But regulations should be relaxed as private pension funds gain in maturity. Like other financial institutions, private pension funds require a panoply of prudential and protective regulations to ensure their soundness and safeguard the interests of affiliated workers. These regulations include authorization criteria (such as minimum capital, fit and proper, and business plan requirements), asset segregation and external custody, professional asset management, external audits and actuarial reviews, extensive information disclosure, and effective supervision. These regulations resemble those applied to banks and insurance companies and are not particularly controversial. But private pension funds in developing countries are often subject to structural and operational controls that are more controversial. Such controls include special authorizations and market segmentation, one account per worker and one fund per company rules, nondiscrimination provisions, regulations on fees and commissions, investment limits, minimum profitability rules, and state guarantees. Vittas discusses the use of such regulations in developing countries that have implemented systemic pension reforms. He draws a distinction between this approach and the more relaxed regulatory regime that relies on the prudent person rule found in more advanced countries. He argues that the draconian regulatory approach can be justified on several grounds, but especially by the compulsory nature of the pension system, the absence of strong and transparent capital markets, and the lack of a long tradition of private pension funds. But the regulations should be progressively relaxed as private pension funds and their affiliated workers gain in experience, sophistication, and maturity. This paper-a product of the Development Research Group-is part of a larger effort in the group to study pension funds and institutional investors.
Author: Dimitri Vittas
Publisher: World Bank Publications
ISBN: 8042911114
Category : Pension reform
Languages : en
Pages : 45
Get Book Here
Book Description
March 1998 Although controversial, investment and other draconian regulations for private pension funds are suitable for countries with weak capital markets and little tradition of private pension provision. But regulations should be relaxed as private pension funds gain in maturity. Like other financial institutions, private pension funds require a panoply of prudential and protective regulations to ensure their soundness and safeguard the interests of affiliated workers. These regulations include authorization criteria (such as minimum capital, fit and proper, and business plan requirements), asset segregation and external custody, professional asset management, external audits and actuarial reviews, extensive information disclosure, and effective supervision. These regulations resemble those applied to banks and insurance companies and are not particularly controversial. But private pension funds in developing countries are often subject to structural and operational controls that are more controversial. Such controls include special authorizations and market segmentation, one account per worker and one fund per company rules, nondiscrimination provisions, regulations on fees and commissions, investment limits, minimum profitability rules, and state guarantees. Vittas discusses the use of such regulations in developing countries that have implemented systemic pension reforms. He draws a distinction between this approach and the more relaxed regulatory regime that relies on the prudent person rule found in more advanced countries. He argues that the draconian regulatory approach can be justified on several grounds, but especially by the compulsory nature of the pension system, the absence of strong and transparent capital markets, and the lack of a long tradition of private pension funds. But the regulations should be progressively relaxed as private pension funds and their affiliated workers gain in experience, sophistication, and maturity. This paper-a product of the Development Research Group-is part of a larger effort in the group to study pension funds and institutional investors.
Author: Dimitri Vittas
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
Although controversial, investment and other draconian regulations for private pension funds are suitable for countries with weak capital markets and little tradition of private pension provision. But regulations should be relaxed as private pension funds gain in maturity.Like other financial institutions, private pension funds require a panoply of prudential and protective regulations to ensure their soundness and safeguard the interests of affiliated workers. These regulations include authorization criteria (such as minimum capital, fit and proper, and business plan requirements), asset segregation and external custody, professional asset management, external audits and actuarial reviews, extensive information disclosure, and effective supervision. These regulations resemble those applied to banks and insurance companies and are not particularly controversial.But private pension funds in developing countries are often subject to structural and operational controls that are more controversial. Such controls include special authorizations and market segmentation, one account per worker and one fund per company rules, nondiscrimination provisions, regulations on fees and commissions, investment limits, minimum profitability rules, and state guarantees.Vittas discusses the use of such regulations in developing countries that have implemented systemic pension reforms. He draws a distinction between this approach and the more relaxed regulatory regime that relies on the prudent person rule found in more advanced countries. He argues that the draconian regulatory approach can be justified on several grounds, but especially by the compulsory nature of the pension system, the absence of strong and transparent capital markets, and the lack of a long tradition of private pension funds. But the regulations should be progressively relaxed as private pension funds and their affiliated workers gain in experience, sophistication, and maturity.This paper - a product of the Development Research Group - is part of a larger effort in the group to study pension funds and institutional investors.
Author: Dimitri Vittas
Publisher:
ISBN:
Category : Fondos de pensiones
Languages : en
Pages : 37
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Book Description
Author: Hemant Shah
Publisher: World Bank Publications
ISBN:
Category : Chile - Seguridad social
Languages : en
Pages : 44
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Book Description
Author: Pulle Subrahmanya Srinivas
Publisher: World Bank Publications
ISBN:
Category : Business & Economics
Languages : en
Pages : 60
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Book Description
'Draconian' regulations have created distortions in asset management, limited opportunities for diversification, and, as a consequence have hampered, the performance of pension funds. This volume shows that the return to retirement assets, expected replacement rates, and, hence, the net welfare gain from pension reform is lower under a draconian regulatory framework than under a more liberal pension fund investment regime. Important policy conclusions of the paper are that existing regulatory regimes should be liberalized as soon as possible to allow pension fund investments in a wider array of financial instruments and that regulations should require evaluation of pension fund performance against market benchmarks as opposed to exclusive focus on comparisons with industry averages. The paper also suggests a review of the current structure of the private pension fund industry in Latin America and an evaluation against alternatives in the light of actual performance experience.
Author: E. P. Davis
Publisher: World Bank Publications
ISBN:
Category : Canada
Languages : en
Pages : 85
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Book Description
Company pension funds can make important contributions to retirement income and to capital market development. But they need to be regulated and supervised to avoid fraud; protect the interests of workers, and minimize restrictions on labor mobility.
Author: Hemant Shah
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
June 1997 Although well-meant, Chilean-style pension reforms distort incentives for competition, raise costs, and reduce desirable investment choices and returns. This proposed departure from a Chilean-style private pension fund system would permit banks and mutual funds to manage retirement savings. It would also require that returns be reported on a net basis, and would charge commissions as a fraction of assets managed. Shah analyzes the typical model for regulating investments in private pension funds. Pension reforms like those pioneered by Chile are being initiated or considered in Argentina, Bolivia, China, Colombia, Costa Rica, Hungary, Mexico, Peru, Uruguay, and elsewhere. Such reforms greatly improve fiscal discipline, make social security benefits and burdens equitable, and deepen financial markets. But they are also typically accompanied by: * Tight restrictions on the investments in pension fund portfolios. * Restrictions on the management of mandated retirement savings (to newly created legal entities called pension administrators, to the exclusion of such financial intermediaries as banks and mutual funds). * Minimum-return guarantees from the state and/or pension funds. * Commissions based on salary rather than on the volume of assets managed. Illustrating his conclusions with case studies from Chile and Peru, Shah shows that these restrictions, though well-meant, are poorly justified by financial theory, distort incentives for competition based on product choice and efficiency, increase administrative costs, and seriously reduce the affiliates' appropriate risk-return choices and returns. And the resulting potential losses in retirement income are great. Shah recommends a significant departure from the Chilean-style model of a private pension fund system. He briefly describes implementation and transition issues for the alternative system that he proposes, which would: * Permit diverse intermediaries- banks and mutual funds that meet appropriate prudential standards- manage retirement savings. * Allow a greater choice between investment products. * Require that returns be reported on a net basis. * Charge commissions as a fraction of assets managed. This paper-a product of the Advisory Group, Technical Department, Latin America and the Caribbean Regional Office-is part of a larger effort in the Region and the Economic Development Institute to disseminate policy research on social security reforms. An earlier version was presented at an EDI Conference, Pension Systems: From Crisis to Reform, in November 1996.
Author: International Network of Pensions Regulators and Supervisors. Conference
Publisher: OECD Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 336
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Book Description
The issue of providing appropriate financial security for retirement is of growing importance for both OECD member and non-member countries, and the approaches adopted to implement the necessary reforms vary depending on each country's economic, social and demographic environment. Increasingly, however, reform programmes involve the establishment or extension of private pension arrangements. This book contains a selection of papers presented at a meeting in April 2001 of the International Network of Pension Regulators and Supervisors (INPRS) and the OECD to discuss the key policy implications arising from the growth of private pension schemes.
Author: Dimitri Vittas
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
August 1996 The early performance of Hungary's voluntary private pension funds suggests that concerns about Hungary's ability to implement successful pension reform may be exaggerated. Despite the limited scope resulting from the high payroll taxes for the compulsory, unfunded public pillar in Hungary's pension system, the early performance of the voluntary private pension funds has been encouraging and in many respects better than expected. Investment returns have been well above the rate of inflation and participation has expanded rapidly. But, Vittas argues, the sector is highly fragmented and there are several regulatory weaknesses (although action is already under way to remedy some of them): * No compulsory use of custodian and licensed asset managers. * Use of book values and cashflow accounting rather than market values. Market valuation on mutual fund principles would allow more meaningful rates of return to be reported and would avoid penalizing workers who transfer their accounts. * Costly tax treatment that benefits high income earners but provides no incentives to nontaxpayers. * Infrequent statements and inadequate information disclosure on fund performance. * No guarantees for minimum levels of relative profitability, and a need for strengthened and more effective supervision. The potential of the private pension funds will clearly remain limited without systemic reform. Hungary's pension system suffers from the same problems that afflict most pay-as-you-go (PAYG) systems in Eastern Europe: high system dependency ratios, low retirement ages, lax criteria for disability pensions, increasing evasion, heavy pension costs, and large deficits. In May 1996, Hungarian authorities decided to create a mixed system with two mandatory pillars and one or more additional voluntary pillars. The first pillar will offer a basic pension to all eligible Hungarian workers and will be organized on a PAYG basis, while the second pillar will be a fully funded, privately managed, decentralized system based on individual capitalization accounts. The private pillars should boost economic growth by developing capital markets and removing distortions in labor markets. Systemic reform faces two main regulatory challenges: whether to impose the mandate on individual workers or their employers, and how to build a mandatory pillar on institutions that have already emerged for the voluntary pillar. Vittas suggests that a workable and promising compromise could be the use of a hybrid mandate combining an employer mandate with a right for workers to opt out and join an independent fund. Most other regulatory issues would apply with at least as much severity under a compulsory private funded pillar as under a voluntary one. This paper -- a product of the Financial Sector Development Department -- is part of a larger effort in the department to study pension funds and contractual savings.
Author: United States. Congress. Senate. Committee on Finance. Subcommittee on Savings, Pensions, and Investment Policy
Publisher:
ISBN:
Category : Government publications
Languages : en
Pages : 364
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Book Description
