As the pension reform debate rages on into the third decade of its existence, since most of the participants in the debate are either from academia or development agencies, one of the three key pillars of reform has been neglected and barely addressed. Ultimately, one can evaluate the efficacy of a reform by its ABCs; namely, the size of Benefits promised (if DB) or targeted/achieved (if DC), the level and volatility of Contributions imposed, and the ability of the government to Administer the reform effectively. Effective administration of social security is a very complex exercise, and without an efficient administrative system at the many levels of the process, from the initial step of recording participants to collecting contributions and all the way to disbursing pensions, a reform can easily fail.
Into this void enters Priority Challenges in Pension Administration, to start to shed light on this critical topic. Based on a conference organized in Tokyo, the editor has stitched together the contributions to help countries address four major challenges: to (a) bring self-employed and participants in the informal sector into the mainstream; (b) keep costs low so that they are not a drag on pensions; (c) create greater acceptance; and (d) utilize information and communication technologies (ICT) which can deliver many services over vast distances, ‘to maintain the social legitimacy of pension schemes and social security administrations’. This book could not have been more timely as many countries who adopted the ‘Three Pillar Approach’ or some variation of a ‘Notional Defined Contribution’ system are rethinking the key reform issues and the experiences with administration can help influence the future direction of reform.
The strength of this volume is that it has a truly international focus with exceptional case studies from both the developed and developing world. Its coverage of countries like Brazil, Canada, Denmark, Japan, Korea, The Netherlands, Sweden, The United Kingdom and The United States of America provides a treasure trove of information which would be of interest to reformers, the administrators of country pension schemes in the process of reform, and development agencies. These case studies highlight success stories and challenges in transitioning from an existing legacy administration to a new pension offering and implementation. It also addresses the future challenges faced by countries in Asia and Central Europe. Having had the fortune to spend time with the Social Security Protection Fund in Azerbaijan and view its amazingly high-tech administration system, one wishes that a case study on Azerbaijan had also been included in this book. The editor needs to be commended for not only organizing a conference to allow countries which have implemented reform to share ideas and experiences with countries on the verge of reform and potential transitions but also for producing a book that aims to serve as a compendium for those who seek such information.
To return to Azerbaijan, this is a case study that is worthy of merit, but missing in this collection. Their system has leveraged ICT extensively from electronic entry of participants into the system from various regional offices and issuance of social security identity cards (including verification to prevent duplication and fraud), to automatic scanning of forms into text-based records that highlight potential errors and an immediate validation against the central databases, to an electronic submission and reconciliation of contributions from employers and tax authorities (including participants who may be in one system but not the next), to issuance of a debit card for the receipt and access to pensions (with an SMS sent when the pension is deposited and with the flexibility to make payments locally and abroad with this same card), to a website that is starting to provide tools to help contributors and retirees plan for retirement. In a way, countries late to the reform game may leap frog a number of the inefficiencies of the developed systems and in a counter-intuitive way, this ‘developing country’ experience may be worth emulating by the developed world.
However, the strength of this book is also its weakness. The task of the editor in such an endeavor is to help the reader see a common thread and to provide them with a menu of options to consider as they design their own pension systems and administration platforms. As a result, this reviewer feels that the book is missing a final chapter that ties it all together for the reader to then use as a guidepost to evaluate and design their own reform. For example, since each case study does not follow a uniform structure, the case study on Brazil provides a very ‘hardware’-oriented summary of the technology components, whereas some of the case studies of the developed markets are exceptionally good in explaining the more basic aspects of the goals of the reform and how the administration achieves these goals. One wishes that the editor had imposed the structure of say the Canadian or Swedish case study on all of the case studies so that the reader is able to make a comparative analysis of the strengths and weaknesses of each administrative approach relative to the type of system in the countries (e.g., pay-as-you-go vs. notional vs. partially or fully funded; defined benefit vs. defined contribution; pooled investment arrangements vs. individual choice). A simple matrix would have sufficed and each country's experience could have been evaluated along a number of ‘C's; namely, (a) coverage; (b) collection of contributions; (c) completeness of records; (d) convenience; (e) cost; (f) ‘compensation’ or benefit payment; (g) confidentiality/privacy; and (h) comprehensive information across all pension accounts whether public or private, mandatory or voluntary. This simple ‘score card’ of how each of the countries has fared against these criteria would allow a country that is contemplating reform to seek the information from the country/countries that has/have already experienced the pain of implementing a system.
All said and done, the editor must be commended for having taken the first step in this important direction and one hopes that this book serves as the first of many that simplify how countries, especially in the developing world where high costs can detract meaningfully from pensions, are able to achieve a pension system that delivers a universal, robust, transparent, low-cost pension to all its citizens.
