ING concept for Czech pension reform – an innovative solution
ING has a vested interest in improving the economic and social environment of each country that it operates in. In order to help improve the economic and social environments of the various countries it operates in, ING offers governments its expertise to help them meet the some of the challenges that their respective countries are facing. In the Czech Republic, pension reform is one of the key economic and social challenges and ING, having a 150 year tradition in pensions, has offered to help meet this challenge by having its experts develop a pension system that would solve most of the issues that have arisen from the current pension system, which is facing a difficult time in meeting its obligations towards future pensioners.
The ING pension concept has one main goal and that is to ensure that the Czech pension system is BOTH economically and socially viable, meaning that in the long term it does not create unsustainable deficits in the national economy and that it offers a sufficient pension (approximately 50% of average salary) for the vast majority of pensioners, and that this is achieved in a fair manner without increasing contributions (taxes).
The ING expert team achieved this goal by realizing that in pensions there is a direct relationship between contribution (investment) and benefit (pension) and the size of benefit (pension) depends on size of contribution (investment). It was also realized that in pensions there are TWO types of contributions. In Pay-As-You-Go systems the contribution is children and in Fully Funded (savings) systems it is money. This distinction allowed for mathematical modeling that showed that if the current Czech PAYG system was adapted to pay pensions in accordance to the level of contributions (children) and a Fully Funded (savings) system was introduced to mitigate the differences caused by this adapted PAYG system (size of pension based by number of children an individual has), an economically and socially balanced pension system would exists without any drastic long term implication for the national economy or the individual pensioner.
For more information about ING’s pension concept please see the attached article and presentation.
