The World Bank and IMF have been criticised for cajoling the states of Central and Eastern Europe into adopting the Chilean pensions model by EURACS chairman Huw Wynne-Griffith.
Speaking at the consultancy network's recent Bratislava conference, Wynne-Griffith said: In Central and Eastern Europe, I worry that we are getting a bit of colonialism coming out of the World Bank and the IMF in insisting on the Chilean model."
He also questioned the concept of a DC second pillar.
"I wonder if this is a case of fashion. In every country in Europe no public servants or large industries offer anything other than DB. In the light of recent large market moves will the change to DC be easy to sell in Eastern Europe?"
The success or otherwise of the Chilean system had been questioned in workshops at the conference while those with knowledge of the Eastern European system were scrutinised about potential weaknesses.
Speaking in the workshops, Danny Wilding of UK consultant Barnett Waddingham pointed out that, while Chilean the system had succeeded by certain yardsticks, it was badly affected by too many switches between the 13 designated pensions management companies or AFPs.
Sixty per cent of the population had no faith in the system while half were failing to make contributions. Investment returns of 12% were producing pensions 50% higher than under the old system but should have been 300% higher. "The problem is not that pensions are too portable but that the companies oversell," Wilding added. Marketing spend and sales commissions were high, leading to 2 million changes of provider in 1996 alone (from 5.5m members), although steps were now being taken to restrict this.
Maria Major, Secretary of State at the Hungarian Ministry of Welfare when questioned about this threat, defended Hungary's reform. "The funds will be competitive but he limit of changing will be 16 months. We would like the regulator to decide on these matters and think we can moderate the problem." John Lappin"