A Global Perspective on Financial Regulation
Edited by John Evans, Michael Orszag and John Piggott
Chapter 5: Pension Supervision: Understanding International Practice and Country Context
Richard P. Hinz and Anca Mataoanu 1. INTRODUCTION Over the past two decades, privately managed pensions have expanded from the exclusive purview of the wealthiest nations and a handful of colonial legacies to play a central role in retirement income worldwide. An explosion of private systems emanated from Latin America and Central and Eastern Europe in the 1990s as middle-income countries in transition struggled to find alternatives to financially unsustainable public systems and to establish pensions with labour market dynamics and incentive structures compatible with current demographic realities. Developing countries are increasingly attracted to private pensions because of their ability to provide a viable means to create high rates of income replacement for formal sector and higher-earning workers, and their potential to mobilize capital to facilitate financial market development and stimulate growth. The design and operation of private pension systems are as varied as the settings and motivations behind them. All share extensive regulatory and supervisory systems that seek to establish and enforce a framework that enables them to function fairly and efficiently and provide a high level of security. Although there is a growing body of work on the theory and economics of private pension systems, it tends to focus on the financial implications and consequences of these arrangements rather than on understanding their operation and oversight. Very little consideration has been given to the way private systems are supervised or to the factors that determine the relationships between the design of a private pension system, the environment in...
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