The paper presents a multidimensional approach to the adequacy of the
pension system, recognising it as the most relevant in comparative
analyses of pension systems, as well as more authoritative than a
one-dimensional approach based exclusively on pensioners’ income
calculated on the basis of the replacement rate. Adequacy of the pension
system can be also understood to mean the effectiveness of pension
system when assessing its ability to realize income objectives. Starting
from the micro- and macro functions of the pension system, OMC and
World Bank objectives in terms of pension adequacy, and taking into
account the indicators used by the European Commission to monitor the
attainment of OMC objectives, the paper presents the overall concept of
multidimensional adequacy of a pension system. Three dimensions of
adequacy are defined: income, poverty, and differentiation of
pensioners’ material situation by gender. Next, sub-indicators measuring
the individual dimensions of adequacy are proposed, along with an
aggregation procedure based on the tools of multidimensional statistical
analysis. First the sub-indicators are aggregated into synthetic
indicators for individual dimensions, and finally the synthetic
indicators for individual dimensions are aggregated into a single
synthetic indicator of the adequacy of the pension system (APS). Based
on the proposed procedure, the adequacy of the pensions systems of 26
European countries is measured, and the quality of this measurement is
assessed.
http://bit.ly/KWdyGF
By Filip Chybalski, Pensions Institute
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