World Bank’s Pension Conceptual Framework

World Bank’s Pension Conceptual Framework

Subject :Economy

• The World Bank provided a Pension Conceptual Framework in 2008 which is adapted from the World Economic Forum.
• The Five Pillar Framework is the template that the World Bank uses for recommendations regarding  reform of country-wide pension systems.
• The various pension plans for the provisioning of old age financial security in different countries can be broadly classified into five groups or pillars, depending on their funding mode and target population:
  • Zero pillar: A non-contributory basic pension from public finances to deal explicitly with the poverty-alleviation objective.
  • First pillar: A mandated public pension plan with contributions linked to earnings, with the objective of replacing some pre-retirement income.
  • Second pillar: Typically, mandated defined contribution (DC) with individual accounts in occupational or personal pension plans with financial assets.
  • Third pillar: Voluntary and fully funded occupational or personal pension plans with financial assets that can provide some flexibility when compared to mandatory schemes.
  • Fourth pillar: A voluntary system outside the pension system with access to a range of financial and non-financial assets and informal support such as family, healthcare and housing.
• The World Bank’s  Pension Primer identifies three relevant process criteria for pension:
  • a long-term, credible commitment by the government;
  • local buy-in and leadership; and
  • sufficient capacity building and support for implementation arrangements.