Seminar paper from the year 2004 in the subject Economics - Finance, grade: 1,0 (A), Technical University of Darmstadt (Institute for Finance and Economic Policy), language: English, abstract: Traditional pension systems continue facing major problems regarding their sustainability. Significant demographic changes in modern societies and antiquated attributes of pensionsystems result in increasing deficits in public budgets. Various proposals, trying to reformtraditional pension systems via conservative reforms, failed to fix the emerging problems. This paper explores substantial opportunities to reform persisting pension systemsstructurally. By considering different theoretical approaches of reforms and actualimplementations of structural pension reforms in practice, advantageous alternatives ofdesigning pension schemes shall be assessed. Furthermore, the authors aim at stimulatingdiscussions about structural pension reforms by introducing a profound reform proposal. Numerous debates and ideas, concerning the pensions system and its reforms, have arisenduring the last ten to 20 years all over the world. Moreover, in 1994, the World Bankpublished a book Averting the Old Age Crisis: Policies to Protect the Old and PromoteGrowth . The diagnosis of this book, summarized by Michael Bruno, was that systemsproviding financial security for the old are under increasing strain throughout the world 1. As long as the number of retirees does not grow faster than total earnings of employees [inthe current system], the tax receipts can continue to pay the benefits of retirees 2. But becauseof important changes in the demographic situation and mis-constructions in present systems,this condition does not hold true anymore: first, the birth rate in most countries of theOrganization for Economic Co-operation and Development (OECD) decreases continuously. Thus the number of young employees decreases, too. Second, the people, born in the time ofthe baby boom (after World War II, the so-called baby boomers ), will retire during the nextdecade. Additionally, due to the progress in medicine and high living standards, longevityincreases. According to a prediction of the World Bank (1998), the portion of people over 60in OECD-countries will rise from 19.9% in 2000 to 31.2% in 2050. Almost a tripling from7.3% to 20.7% is expected in Asia within this period3. [...]1 See Fox/Palmer New Approaches to Multipillar Pension Systems: What in the World is Going On? , page 902 See Gruber and Wise, Different Approaches to Pension Reform from an Economic Point of View, page 503 See Fox and Palmer, table 3.2
