State-backed pensions with a strong dose of market investment are the best way of ensuring that today's workers do not slide into poverty when they reach retirement, the World Bank said on Tuesday.
In a new report analysing the pensions crisis facing many developed nations, the World Bank said short-term budgetary fixes were no substitute for well-thought-out, long-term solutions.
The aging of the post-war "baby boomer" generation is the most notable challenge facing hard-pressed national treasurers in much of the rich world, particularly in Europe and Japan.
But the report said the pensions situation was complicated by the labor market growing more fragmented due to higher divorce rates, increased numbers of women in the workforce and more part-time jobs.
Richard Hinz, a co-author of the World Bank study, said many countries in the developing world had already taken heed of the looming demographic and social problem.
"Pension reforms in a wide variety of countries, from central and eastern Europe to Latin America and Asia, have already led to systems that will provide a solid foundation for future growth and security," he said.
"Governments in other regions need to learn from this experience to undertake reforms before they are overwhelmed by the fiscal and social costs of not having acted quickly and comprehensively enough," he said.
The World Bank, which has advised more than 80 countries on pensions reform, said "no one size fits all."
But successful retirement plans instituted by governments have some elements in common, it said. These include a strong state component, so that the poorest retirees are not left penniless in their old age. But the state alone cannot foot the rapidly mounting pensions bill, the report said.
Advance funding in terms of individual contributions by workers, coupled with "market-oriented investments," are seen as "key elements" of most reforms, it said.
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