Ensuring fiscal sustainability: assessing recent proposals for pension reform.

The Czech Republic faces one of the largest demographic challenges in the OECD area and making sure the public pension system is able to cope with rapid growth in older cohorts is important for long-term fiscal stability and social welfare. This chapter assesses five proposals for pension reform made in 2005 with a view to helping progress towards a final decision on reform. The proposals cover a wide range of options: only parametric change of the current pay-as-you-go (PAYG) system, systems combining a PAYG pension with a second-pillar (defined-contribution), a flat-rate pension and a system of notional accounts. The analysis uses OECD simulation models to compare the proposals in terms of fiscal sustainability, safety nets, early retirement incentives, diversification into private provision, simplicity and the pensions-earnings link. [ABSTRACT FROM AUTHOR]