Press Release: IMF Gathers Experts to Discuss Design of Fiscally Sustainable and Equitable Pension Systems in Asia
January 10, 2013Press Release No. 13/08
January 10, 2013
The world’s leading experts and practitioners on pension issues gathered in Tokyo with policy makers from 16 Asian countries to discuss how advanced and emerging Asian countries can address their pension challenges in a sustainable and equitable manner. The two-day conference, Designing Fiscally Sustainable and Equitable Pension Systems in Asia in the Post-Crisis World, was organized by the International Monetary Fund (IMF) Fiscal Affairs Department and the IMF Regional Office for Asia and the Pacific (OAP), with the generous support of the Japanese Government.
“Pension reforms are high on the policy agenda of many advanced and emerging market economies, including in Asia,” said Sanjeev Gupta, Deputy Director of the IMF’s Fiscal Affairs Department. “The conference offered an excellent opportunity to discuss how these countries can reform pension systems while ensuring equity within and across generations,” he added, noting that for the IMF, with its primary focus on macroeconomic stability of its member countries, pensions are a key part of the discussion on fiscal policy.
Participants agreed that long-term fiscal challenges from pension spending have become all the more important after the large increases in public debt in the advanced economies due to the recent economic and financial crisis. In advanced economies, the challenge is to contain future increases in public pension systems as the population ages, while the current low-yield environment adds another challenge for countries relying heavily on funded pensions.
Even in emerging economies, which in general enjoy more fiscal space, pension reforms are important: the key here is to expand low pension coverage in a fiscally sustainable manner. They will also have to address this issue while their populations also age rapidly, reflecting the decline in fertility rates across most emerging economies.
In addition to dealing with long-term fiscal sustainability, the conference also focused on equity issues related to pension system design, particularly the effects of different reform options on equity within generations (especially the impact on low-wage workers, who have shorter life expectancies) and across generations (how different age groups are affected by pension reforms).
Key messages from the conference for the design of public pension reforms include: (1) the importance of ensuring that pension systems provide adequate income support for the elderly poor; (2) the need to ensure that the pension system does not run large deficits and is fiscally affordable; (3) the advantages of raising retirement ages, in response to increasing life expectancy, to improve the finances of the pension system and boost economic growth by raising labor supply; (4) the importance of increasing the share of the elderly population receiving pensions in emerging Asia; (5) the importance of improving the management of private pension funds to raise returns and increase transparency; and (6) the need to ensure that pension reforms are perceived as fair and that once implemented, pension reforms are not reversed.