Fundamental Decisions for the Reform of Pension Systems

This paper outlines the fundamental options for the design of pension systems in any country. The financing and benefits structure is described, with particular reference to distribution policy objectives. The need for thorough preparation to back up decision‐making is emphasized, together with the need to take into account the many and varied interactions with other institutions and fields, particularly the long‐term effects of changes and the prevailing conditions in the country concerned. Reforms often involve long‐term transitional arrangements, so that different forms of pension provision should not be compared in isolation, although this is often done when comparing pay‐as‐you‐go financing and capital funding. Moreover, a close link can be established between contributions and the subsequent pension in state pay‐as‐you‐go schemes as well as private, funded pension provision. Finally, in the decision‐making process, more attention needs to be paid to the flow of information to decision‐makers, citizens and the media in order to increase the acceptability of reform measures.