Introducing Funded Pension Systems: International and Russian Experience

The article reviews international experience of the pension reform switching from PAYG pension system toward funded or mixed ones. Issues related to reception of new institutions and changes in institutional environment are considered, recommendations on correction of the Russian pension system are formulated. Global experience shows that funded pension systems were successfully introduced either by democratic political regimes based on consensus or by dictatorships using authoritarian methods. In the latter case, reform plans were corrected as implementation proceeded. Stability of the reformed pension system strongly depends on its transparency and protection mechanisms for employees and employers built within the system. Funded pension system brings higher formal employment but creates new administrative barriers and transaction costs, increasing stability but reducing flexibility of the social insurance system.