Automatic Adjustment Mechanisms in Asian Pension Systems?

Abstract

Automatic adjustment mechanisms (AAMs)-rules ensuring that certain characteristics of a pension system respond to demographic, macroeconomic and financial developments, in a predetermined fashion and without the need for additional intervention-have been introduced in many OECD countries to tackle public pension schemes' deteriorating financial sustainability. Incorporating AAMs-in particular linking retirement age to life expectancy-can be an important part of pension reforms in Asia. If implemented early, AAMs could help prevent the need for sharp adjustments in the future, increase the predictability and inter-generational equity of pension systems and enhance confidence.

Keywords: Pensions, Japan, Korea, Republic of, China, Asia, Retirement, Pension reforms, Pension System Reform, Automatic Adjustment Mechanisms

JEL Classification: H55