Table 5 Alternative approaches to pension reform
From: Political economy of pension reforms: selected general issues and the Polish pension reform case
Typical “three pillar” reform | Security through Diversity |
|---|---|
▸ Downsized and possibly rationalised old system, named the “first pillar” | ▸ Splitting old system into OA and NOA |
▸ Termination of the OA part of the old system | |
▸ New “funded” system named “second pillar” created in the room left after the downsizing of the old system | ▸ Creation of entirely new OA system |
▸ Rationalisation of NOA | |
▸ Contribution split between two accounts within the new OA | |
▸ Contribution split between the old and the new system | ▸ First individual account – non- financial; rate of return determined by GDP growth |
▸ Switching process based on individual preferences | ▸ Second individual account – financial; rate of return determined in financial markets |
▸ Variety of pay-out methods in the “second pillar” | ▸ Annuitisation of both account values |
▸ Promotion of various forms of additional savings | ▸ Promotion of various forms of additional savings, named the “third pillar” |