Fiscal Effects of the 1993 Colombian Pension Reform Sergio Clavijo

ISBN: 9781282110984

Published: November 1st 1998

ebook

48 pages


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Fiscal Effects of the 1993 Colombian Pension Reform  by  Sergio Clavijo

Fiscal Effects of the 1993 Colombian Pension Reform by Sergio Clavijo
November 1st 1998 | ebook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, RTF | 48 pages | ISBN: 9781282110984 | 4.39 Mb

This paper examines the fiscal impact of the pension reform approved by the Colombian congress in December 1993 (Law 100 of 1993).2 The reform aimed to broaden the coverage of the pension system, remove inequities, and provide adequate andMoreThis paper examines the fiscal impact of the pension reform approved by the Colombian congress in December 1993 (Law 100 of 1993).2 The reform aimed to broaden the coverage of the pension system, remove inequities, and provide adequate and sustainable retirement benefits.

The central feature was the establishment of a defined contribution, fully funded, privately administered pension system, alongside the public pay-as-you-go (PAYG) pension system. Section II of the paper discusses the main aspects of the 1993 pension reform, highlighting departures from the original framework proposed to congress. Section III presents an estimate of the outstanding net liabilities of Colombias pension system.

Section IV models the fiscal impact of the reform in terms of operating balances of the pension schemes, the accumulation of reserves, and developments with respect to pension liabilities. The model indicates that the reform represents a reduction in fiscal expenditures of about 1 percent of GDP annually during the transitional period 1994-2030 compared with a scenario of no reform- however, primary public savings need to be maintained in the range of 3-4 percent of GDP in order to be able to service a stock of pension debt estimated to be between 86-120 percent of 1995 GDP.

A new set of pension reforms is needed to address concessions granted to special groups of public servants, and the level and conditions under which public guarantees are provided, including the effect of switching frequently between the PAYG and the privately administered scheme as provided under the 1993 reform. Section V looks at recent developments with regard to private savings and the performance of the pension fund management companies.

Concluding remarks are provided in Section VI.



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