Nicaragua : Pension Reform Proposal
The study reviews the current social
security system, and its characteristics, analyzing the
shortcomings of the Old Age, Disability and Survivor's
Insurance (IVM) system, based on a defined benefit
Pay-as-you-go (PAYG) scheme, no longer viable, given its low
payroll taxes, overly generous benefits, and high rates of
evasion, all systemic problems, which combined with
institutional, and administrative weaknesses of the
Instituto Nicaraguense de Seguridad Social (INSS), caused a
cash deficit since 1997, and depletion of its reserves for
the immediate future. The report explores long term
finances, and the rationale for undertaking a systemic
reform with mandatory, and defined contributions, based on
individual capitalization accounts. It recommends closing
the current PAYG system to new entrants, with the proviso
for those aged 45-50, to opt for the new system, granting
recognition for their acquired rights. General revenues,
payroll taxes, and pension fund reserves, or other possible
sources, should finance the transition to the new scheme, to
be administered by pension fund managers. Funds should be
invested both domestically, and abroad, ensuring
diversification of the portfolio, as well as protection from
local economic, and political manipulation.
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Bibliographic Details
| Main Author: |
World Bank |
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| Language: | English |
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| Published: |
2000-04-03
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| Subjects: | PENSION REFORM,
SOCIAL SECURITY SYSTEMS,
PAY-AS-YOU-GO SYSTEMS,
TAX EVASION,
FINANCIAL LOSS,
FINANCIAL MANAGEMENT,
INFLATION,
LABOR MARKETS,
INVESTMENT RETURNS,
INDIVIDUAL RETIREMENT ACCOUNTS,
REGULATORY FRAMEWORK,
ADMINISTRATIVE ARRANGEMENTS,
SOCIAL COSTS,
INVESTMENTS,
PENSION INSURANCE,
PENSION VALUATION,
SOCIAL ASSISTANCE PROGRAMS,
CONTRIBUTIONS,
PUBLIC AWARENESS ADMINISTRATIVE COSTS,
ADVERSE SELECTION,
AFFILIATES,
BANKING SECTOR,
BANKING SUPERVISION,
BANKRUPTCY,
BENEFIT FORMULA,
BENEFIT RATE,
BIDDING PROCESS,
CAPITAL MARKETS,
CAPITAL REQUIREMENTS,
CAPITALIZATION,
COMMERCIAL BANKS,
COMPETITIVE BIDDING,
CONTRIBUTION BASE,
CONTRIBUTION RATE,
CONTRIBUTION RATES,
CONTRIBUTION RECORDS,
DEBT,
DEFICITS,
DEFINED BENEFITS,
DEMOGRAPHIC TRANSITION,
DEPENDENCY RATIO,
DEPOSIT INSURANCE,
DISABILITY,
EXCHANGE RATE,
EXPENDITURES,
EXTERNAL AUDITORS,
FINANCIAL INSTITUTIONS,
FINANCIAL MARKETS,
FINANCIAL STABILITY,
FISCAL YEAR,
FOREIGN EXCHANGE,
FRAUD,
HEALTH CARE,
HUMAN DEVELOPMENT,
INCOME,
INCOME GROUPS,
INDEXATION,
INFORMAL SECTOR,
INSURANCE COMPANIES,
INSURANCE INDUSTRY,
INSURANCE MARKETS,
INSURANCE PREMIUMS,
INTEREST RATES,
INVESTMENT RETURN,
LABOR FORCE,
LEGISLATION,
LIFE INSURANCE,
MANDATORY SYSTEM,
MARKET DISTORTIONS,
MATERNITY LEAVE,
MINIMUM BENEFIT,
MINIMUM WAGES,
MORAL HAZARD,
NEW ENTRANTS,
NORMAL RETIREMENT AGE,
OLD AGE INSURANCE,
PAYROLL TAX,
PENALTIES,
PENSION AGENCY,
PENSION COVERAGE,
PENSION FUND,
PENSION FUND MANAGEMENT,
PENSION FUND MANAGERS,
PENSION LIABILITIES,
PENSION PLAN,
PENSION RIGHTS,
PENSION SYSTEM,
PENSION SYSTEMS,
PENSIONERS,
PENSIONS,
PRESENT VALUE,
PRIVATE BANKS,
PRIVATE PENSION,
PRODUCTIVITY,
PROGRAMS,
REPLACEMENT RATE,
REPLACEMENT RATES,
RESERVES,
RETIREES,
RETIREMENT,
RETIREMENT AGE,
SAVINGS,
SOCIAL ASSISTANCE,
SOCIAL INSURANCE,
SOCIAL SECURITY,
SOCIAL SECURITY PROGRAMS,
SOCIAL SECURITY SYSTEM,
SOLVENCY,
STRUCTURAL ADJUSTMENT,
SURVIVORS INSURANCE,
SUSTAINABILITY,
TAX RATES,
VICTIMS,
WAGES,
WORKERS COMPENSATION, |
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| Online Access: | http://documents.worldbank.org/curated/en/2000/04/728790/nicaragua-pension-reform-proposal
http://hdl.handle.net/10986/14972
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