2008年-世界发展银行全球_Mongolia___Pension_Policy_Challenges_and_Reform_Options_34页_552kb

Mongolia Pension Policy Challenges and Reform Options

Core Content

This document provides an analysis of the pension policy challenges in Mongolia and outlines reform options aimed at improving the sustainability, equity, and effectiveness of the social insurance system. It was prepared by the World Bank in collaboration with the Government and the Asian Development Bank (ADB) to support ongoing pension reform efforts.

Main Objectives

• To identify key challenges in the current pension and social insurance system.
• To propose policy and institutional reforms that can strengthen the system.
• To support the Government and Parliament in achieving a more sustainable and equitable pension framework.

Current Pension Schemes

Mongolia has a dual pension system consisting of:

• Defined-Benefit (DB) Scheme: Provides benefits based on years of service and pre-retirement income. It has high benefit levels and universal coverage, but lacks financial sustainability due to high fiscal dependency.
• Notional Defined Contribution (NDC) Scheme: Introduced in 1999 for workers born after 1960, it aims to transition toward a partially funded system. However, it has not fully replaced the DB scheme and has left abrupt benefit reductions for those born in 1960.

Key Challenges

The document outlines several critical challenges in the current system:

• Minimum Pension Provisions: Both the DB and NDC schemes have minimum pension levels that create poor incentives for wage reporting and compliance, and are the main cause of the long-term projected deficit of 3% of GDP.
• Early Retirement Provisions: Special provisions for early retirement for certain groups (e.g., mothers, special professions) result in lower retirement ages, increasing the cost of the DB scheme and reducing benefits for NDC retirees.
• Income Averaging Period: The current 5-year averaging period without inflation adjustments leads to uncertainty for workers and reduces replacement rates during periods of wage growth.
• Indexation Uncertainty: Ad-hoc indexation has created unpredictability in benefits, weakened credibility, and compromised income security for retirees.
• Abrupt Benefit Reduction: The transition from the DB to NDC scheme has caused a sharp drop in benefits for post-1960 cohorts, which may cause concern among affected groups.
• Weak Voluntary Pension Incentives: Voluntary pension schemes for herders and the informal sector lack provisions for early withdrawal in cases of severe hardship, leading to weak participation incentives.
• Institutional Weaknesses: The governance and institutional framework for the Social Security Insurance General Office (SSIGO) is weak, leading to inefficiencies in benefit delivery and public credibility.

Proposed Reforms

The document recommends the following reforms:

• Review of Societal Objectives: The system should provide:

  • A means-tested social pension for the elderly, disabled, and dependents.
  • Mandatory consumption smoothing for formal sector workers.
  • Voluntary contractual savings for informal sector workers.

• Reforms for Defined-Benefit Scheme:

  • Reduce the minimum pension and replace it with a social pension.
  • Eliminate early retirement provisions and unify retirement ages for men and women.
  • Extend the income averaging period and apply price indexation to wages during the averaging period.
  • Implement automatic benefit indexation linked to price indices.
  • Reduce benefits for pre-1960 cohorts to ease the transition to the NDC scheme.

• Reforms for NDC Scheme:

  • Establish provisions for partial withdrawal of voluntary pension savings based on criteria such as home purchase, loss of income, or health difficulties.
  • Introduce specific withdrawal options for herders and the informal sector in cases of severe hardship.

• Institutional Reforms:

  • Conduct a thorough review of the institutional framework for SSIGO, aimags, and local offices.
  • Improve the central and local information systems for financial and account management.
  • Develop better disclosure methods and dispute resolution mechanisms to enhance accountability and public trust.
  • Establish an investment management infrastructure and governance framework.
  • Improve data on mortality and life expectancy to support annuitized benefits.
  • Enhance coordination between social insurance and tax authorities, with a view to unifying their functions in the medium term.

Key Information

• Contribution Rates: The total contribution rate for social insurance is 29–31%, which is a heavy tax on formal labor and may discourage employment and lead to wage underreporting.
• Benefit Levels: Under the DB scheme, the replacement rate is around 46% for full-term workers. Under the NDC scheme, it is estimated to be around 28% for average wage workers born after 1960.
• Coverage Trends: Coverage has declined from 55% in 1995 to 37% in 2005. Herders and self-employed individuals are largely exempt from contributions.
• Social Assistance for the Elderly Poor: The Social Welfare Pension Benefit provides very small monthly assistance (about US$25), which accounts for 48% of the Minimum Living Standard (MLS). This assistance is limited and only reaches a small portion of the elderly poor.

Summary of Reform Needs and Proposed Policy Options