GLOBAL – An internal World Bank report has criticised large elements of the bank’s involvement in pension reform around the world.
The so-called ‘World Bank model’ advocated a flexible multi-pillar pillar approach and was a template for reform in Latin America and Easter Europe. The bank provided $5.4bn in pension-specific lending from 1984 to 2005.
The bank’s own Independent Evaluation Group has outlined a number of areas where “fundamental issues of old age poverty and inadequate coverage remain unresolved” despite its involvement.
It makes the comments in a 168-page report called ‘Pension Reform and the Development of Pension Systems: an Evaluation of World Bank Assistance’.
The study found that there was insufficient attention on analysing the living standards of the aged and the reform were supported “even though there were clear weaknesses” in countries’ underlying economic and financial structure.
And it found that, contrary to expectations, in many countries with multi-pillar systems, pension funds “remain poorly diversified and pension coverage has not increased”.
It added: “Secondary objectives of introducing funded pension schemes – to increase savings, develop capital markets, and improve labour market flexibility – remain largely unrealised.”
The bank also underestimated “institutional and capacity weaknesses – which hindered the reforms’ effectiveness.
The report said the bank needs to pay greater attention to the pre-conditions needed to support multi-pillar reform. And it also should research “high priority issues” such as the impact of corruption and governance on the feasibility of effective pension regulation.
The World Bank’s management prepared an eight-page response.
It said: “Management finds the study comprehensive in analysing support for pension reforms and agrees with the general thrust of most of the recommendations.”
Meanwhile, the World Bank has praised Sweden's reform as providing “valuable lessons for wealthy, middle-income, and developing countries”.
It said the non-financial or_notional defined contribution systems in Sweden, Italy, Latvia and Poland has allowed them to “organise comprehensive reforms to their pension systems with positive results to date”.