INSURANCE AND PRIVATE PENSIONS COMPENDIUM FOR … · transferred to insurance companies (where...

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COMPARATIVE TABLES ON PRIVATE PENSION SCHEMES

Working Party on Private Pensions Secretariat

2001

Insurance and Private Pensions UnitFinancial Affairs Division

Directorate for Financial, Fiscal and Enterprise Affairs

This report is part of the OECD Insurance and Private Pensions Compendium, available on the OECDWeb site at www.oecd.org/daf/insurance-pensions/ The Compendium brings together a wide range ofpolicy issues, comparative surveys and reports on insurance and private pensions activities. Book 1 dealswith insurance issues and Book 2 is devoted to Private Pensions. The Compendium seeks to facilitate anexchange of experience on market developments and promote "best practices" in the regulation andsupervision of insurance and private pensions activities in emerging economies.The views expressed in these documents do not necessarily reflect those of the OECD, or the governmentsof its Members or non-Member economies.

This document presents the comparative tables which describe the pension system of OECD countries andmost other countries of the International Network of Pension Regulators and Supervisors (INPRS) in a

synthetic manner.

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Table 1: Pension plans in the International Network countries

CriteriaCountry Plan name Benefit / account

balance liquidityFunding and risk-

bearingAdministration Participation Tax treatment

Argentina Socialsecuritysystem

Minimum retirementage is 65 for men and60 for women, beforewhich benefits cannotbe received.

PAYG, DB plan. Plan administered by social securityinstitute.

Employer: mandatorycontribution, cannotset up plans

Employee:mandatory. Canchoose betweenSocial SecuritySystem andindividual accountpension plans

Mandatoryindividualaccountpensionplans

Minimum retirementage is 65 for men and60 for women, beforewhich accountbalance cannot becashed out.

Must be fully-funded, DCplans in accumulationstage, but funds must earna return within a bandcalculated around theaverage of the pensionfund industry. Hence,funds must have a reserveaccount to meet shortfallin performance.

At retirement accumulatedbalance may be annuitised(DB), drawn as a lump-sum for workers with verylow balances at retirement,or as a gradualwithdrawal.

In accumulation stage plans areadministered via open pension fundsonly.

The pension fund administrator is aspecialised financial institutiondedicated exclusively to thatpurpose (Administradora de Fondosde Jubilaciones y Pensiones –AFJP).

Each AFJP may manage onepension fund only.

There are no restrictions inswitching between pension funds.

Benefit payment in the form ofannuities must be contracted withinsurance companies. Other benefitoptions can be managed by AFJPs.

Employee:mandatory.Can choose betweenSocial SecuritySystem andindividual accountpension plans

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balance liquidityFunding and risk-


Affiliate can choose insurancecompanies in the case of annuitychosen as form of benefit.

Government guarantees minimumpension.

Voluntaryindividualaccountpensionplans

Minimum retirementage is 65 for men and60 for women, beforewhich accountbalance cannot becashed out.

Fully-funded, DC plansonly. There are noguarantees.

At retirement accumulatedbalance may beannuitised, drawn as alump-sum for workerswith very low balances atretirement, or as a gradualwithdrawal.

In accumulation stage plans areadministered via open pension fundsonly.

The pension fund administrator is aspecialised financial institutiondedicated exclusively to thatpurpose (Administradora de Fondosde Jubilaciones y Pensiones –AFJP).

Each AFJP may manage onepension fund only.

There are no restrictions inswitching between pension funds.

Benefit payment in the form ofannuities must be contracted withinsurance companies. Other benefitoptions can be managed by AFJPs.

Affiliate can choose insurancecompanies in the case of annuitychosen as form of benefit.

There are also alternative pensionplans through retirement insurancecompanies

Employer: voluntaryto contribute, cannotset-up.

Employee: voluntary

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CriteriaCountry Plan name Benefit / account balance

liquidityFunding andrisk bearing

Administration Participation Tax treatment

Australia Public pension Minimum retirement ageof 60 for women and 65for men.

Financed on aPAYG basis.Flat benefit.

Plan administered bygovernment agency.

Non-contributory.

Paid to all residents inAustralia subject to incomeand assets means tests.

Mandatoryprivate pensionplans –Superannuationguarantee

Minimum retirement ageof 55.

Balance cannot be cashedin before retirement.

On leaving a company, fullaccumulated balance maybe transferred to anotheremployer, occupational,personal plan, or may beused to purchase a deferredannuity - whether it can beretained in the funddepends on individual fundrules

Funded,mainly via DCschemes.

Benefits paidas lump-sumor annuity(which is notnecessarily alife-timeannuity).

Plans must be administeredin a closed or open pensionfund (operating as trusts,called superannuation funds)by trustees.

Asset management can bedelegated.

Benefits can be managed in-house (by trustees) ortransferred to insurancecompanies (where annuitiesare purchased).

Employers: mandatorycontribution to own closedpension fund or, if do not setup fund, to open fund chosenby employer. Legislation isproposed to allowemployees to make thechoice in certaincircumstances.

Employees: mandatory forall workers in private orpublic sector except self-employed and the low-paid,either to closed pension fundset up by employer, or toopen fund.

Employer contributionsare tax-deductible up tocertain levels: A$ 9,405for those less than 35, A$26,125 for those aged 35to 49, and A$ 64,700 forthose over 50.

Earnings taxed at 15%.

Benefits taxed atconcessional rates.

Voluntaryprivate pensionplans

Minimum retirement ageof 55.

Balance cannot be cashedin before retirement.On leaving a company, fullaccumulated balance maybe transferred to anotheremployer, occupational,personal plan, or may beused to purchase a deferredannuity - whether it can beretained in the funddepends on individual fundrules

Funded.

Benefits paidas lump-sumor annuity(which is notnecessarily alifetimeannuity).

Plans must be administeredin a closed or open pensionfund (operating as trusts,called superannuation funds)by trustees.

Asset management can bedelegated.

Benefits can be managed in-house (by trustees) ortransferred to insurancecompanies (where annuitiesare purchased).

Employers: mandatorycontribution to ownsuperannuation fund or onechosen by employer.

Employees: mandatory forall workers in private orpublic sector, but memberscan choose betweenemployer’s plan or apersonal pension plan.

Voluntary contributions tothe funds are possible.

Employer and employeecontributions are tax-deductible up to certainlimits: A$ 9,405 forthose less than 35, A$26,125 for those aged 35to 49, and A$ 64,700 forthose over 50.

Earnings taxed at15%.

Benefits taxed atconcessional rates.

Annuities Funded. Administered by lifeinsurance companies.

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balance liquidityFunding and risk


Austria Social securitypension

Retirement age is 65for men and 60 forwomen.Early retirement ispossible from 60 formen and 55 for women.Retirement age forwomen is to beincreased graduallyfrom 60 to 65.Annuities only areavailable

PAYG.Financed throughemployees’ andemployers’contributions.

Benefits depend onthe amount ofcontribution.

Compulsory statepension for allemployees, self-employed and civilservants

EET

Occupationalpensions

Funded. DB or DC No general rules,Fixed according to theparticular scheme.

Plan may be administeredby book reserve method,life insurance companiesor closed pension funds(mutual insuranceassociations).

Voluntary- noobligation for theemployee or employer.

EET system forcontributions of theemployer: contributionsof the employee canonly be deducted to alimited extent, benefitsare taxed at only 25%

Personalpension plan

Funded. DB or DC Plans administered by lifeinsurance companies

Voluntary Premiums aredeductible from incomeup to a certain ceilingprovided benefitsconsist in the paymentof whole life annuity.Annuities are thensubject to income tax.

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Socialsecuritypensions

Retirement age is 65for men and 61 forwomen.For women it will begradually increased to65 years in 2009.Early retirement ispossible from age 60,subject to proving acertain period of workwhich currently standsat 22 years and will begradually increased to35 years in 2005.Annuities are onlyavailable

PAYG.Financed throughcontributions of theemployer, theemployee and a statesubsidy.Benefits depend onthe amount ofcontributions.There is a minimumand maximumpension.Civil servants’pensions arecalculated on thebasis of the last fiveyears’ contributions.

Plan administered bygovernment body.

Compulsory statepension- covers allemployees, self-employed persons andcivil servants

EETContributions by theemployers constitutetaxable income foremployees.

Occupationalpensions

Funded. Mainly DC.Benefits may notexceed 80% of thegross earnings of thelast year worked.

Both annuities andlump-sum areavailable.

Plan administered via aclosed pension fund(foundation) or insurancecompany.

Partly voluntary: anyemployee joining thecompany after apension scheme hasbeen set up is requiredto join.If no scheme exists, theemployee has a freechoice

EET (Lump sums aretaxed at 16.5% andannuities at the standardrate of income tax).

Belgium

PersonalPension plan

Funded.

Terms and conditionsapplicable aredetermined on thebasis of theindividualrequirements.

Administered bylife insurance companiesand banks

voluntary The premiums are tax-deductible under certainconditions.

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Bolivia Bolividaannuity

Benefits can bereceived from age 65only.

Fully-funded throughprivatisation process

Annuity paid fromage 65. Level ofannuities is fixed bythe government

Managed by two pensionfund administrators (AFP).

No contributions.

Only Bolivian citizensare eligible.

No taxation

Mandatoryindividualaccountpension plans

Minimum retirementage is not required.Benefits can bereceived based onaccount balance.

Benefits can bereceived when thepension provided bythe individual accountis equal to 70% of thenational minimumwage. If thisrequirement is notfulfilled, benefits canonly be received afterthe age of 65 years, inorder to retire with70% of a nationalminimum wage, or beentitled to a minimumwithdrawal

Benefit payments are:retirement pension,survivors and disabilitypensions

Fully-funded. OnlyDC plans permittedin accumulationstage.

There are noguarantees to earn areturn fund.

At retirementaccumulated balancemay be annuitised,drawn as a lump-sum,or as a gradualwithdrawal.

Government does notguarantee minimumpension.

Benefit payments inthe form of annuitiesmust be contractedwith insurancecompanies chosen bythe affiliate. Otherbenefit options can bemanaged by AFPs.

Plan administered duringaccumulation stage via anopen pension fund only.

Asset management andbenefit payment must becarried out by a specialisedfinancial institutiondedicated exclusively tothat purpose(Administradora deFondos de Pensiones -AFP).

Each AFP may manageonly one pension fund(FCI).

There are restrictions inswitching AFPs until theyear 2002.

Benefit payments may beoutsourced to an insurancecompany

Employers: mandatorycontribution only forworker’s compensation.

Employees: mandatoryfor all workers(including public sectorworkers and ArmedForces).

No taxation onretirement pension oron contributions

9




Voluntaryindividualaccountpension plans

Minimum retirementage is not required.Benefits can bereceived based onaccount balance

Benefits can bereceived when thepension provided bythe individual accountis equal to 70% of thenational minimumwage. If thisrequirement is notfulfilled, benefits canonly be received afterthe age of 65 years, inorder to retire with70% of a nationalminimum wage, or beentitled to a minimumwithdrawal

Benefit payments are:retirement pension,survivors and disabilitypensions.

Fully-funded. OnlyDC plans permittedin accumulationstage.

There are no returnguarantees.

At retirementaccumulated balancemay be annuitised ordrawn as a gradualwithdrawal.

Government does notguarantee minimumpension

Benefit payments inthe form of annuitiesmust be contractedwith insurancecompanies. Otherbenefit options can bemanaged by AFPs.(Monthly variablepension or minimumwithdrawals)

Affiliate can chooseinsurance company inthe case annuities arechosen as the form ofbenefit

Plan administered duringaccumulation stage via anopen pension fund only.

Asset management andbenefit payment must becarried out by a specialisedfinancial institutiondedicated exclusively tothat purpose.(Administradora deFondos de Pensiones -AFP)

Each AFP may manageonly one pension fund(FCI).

There are restrictions inswitching AFPs until theyear 2002.

Benefit payment may beoutsourced to an insurancecompany

Employers: do notcontribute

Self-employed:voluntary contributions

No taxation onretirement pension oron contributions

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liquidityFunding and risk bearing Administration Participation Tax treatment

Brazil Private sectorsocial security(RGPS)

No minimum age PAYG basis

Final salary benefit.

Governmentagency.

Employers:mandatorycontribution

Employees:mandatorycontribution forall workers inprivate sector(including self-employed)

Civil servantspensionsystem (RJUs)

No minimum age PAYG basis

Some are partly funded, viareserve funds (in some casesassets managed by privatesector – e.g. Bahia, Parana,and Rio state funds), and, ifComplementary Lawapproved, they may betransformed into closedpension funds.

Currently all offer final salarybenefits, with a 100% benefitguarantee (in Constitution)

Variousgovernmentagencies atfederal, state, andmunicipality level.

Employers:mandatory

Employees:mandatory

Employerpension plans

Minimum age of 65before which benefitscannot be received.No vesting or portabilityrules. Workers typicallylose right to employercontributions when theyleave a job, but receive

Funded

DB, DC, and hybrid schemesall possible.

Plan administeredvia a closedpension fund(foundation –EFPP) or aninsurance contract.

Employers:voluntary to set-up

Employees:voluntary toparticipate

Earnings are taxed, butclosed funds have neverpaid.

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their own contributions(no revaluation) as alump-sum.

Traditionalindividualpension plans(deferredannuities)

Benefits cannot bereceived before age 65.

Policy can be cancelledwith a maximum twoyear delay between therequest and the cashingout of the balance.

Funded.

Plans are deferred annuities,mainly on a with-profit basis,with a (statutory) guaranteedreturn of 6%.

Mandatory annuitisation, withconversion rate fixed bycontract.

Plans may beadministered byan insurancecompany or by aself-administered,open pension fund(both for profitand not for profit– EAPP: sameregulation asinsurancecompanies), or aninsurancecompany.

Employees: allworkers areeligible toparticipate on avoluntary basis.

Contributions are deductibleup to 12% of salary.

Earnings are tax-free.

Benefits are taxed asincome.

PGBL Benefits cannot bereceived before age 65.

Policy can be cancelledwith a minimum delay ofsix months andmaximum of two yearsbetween the request andthe cashing out of thebalance.

Fully-funded, DC duringaccumulation stage.

No guarantees.

Mandatory annuitisation atretirement, purchasing aninflation-indexed annuity.

Open, externallyadministeredpension fund.

The plan isadministered byinsurancecompanies but theassets must bemanaged bycollectiveinvestmentinstruments (CIIs).

Employees:voluntary foremployees, onlyfor those who arenot affiliated toany other pensionplan already.

Employer contributions aretax deductible.

Employee contributions aredeductible up to 12% ofsalary, and up to R$ 2,400per year only.

Earnings are tax-free.


FAPI No portability orcashing-out constraints,but see tax penalties.

Fully-funded, DC inaccumulation stage.No guarantees.

The plan isadministered byeither banks,insurance

Employer:voluntary

Employees:

Employer contributions aretax-deductible as long ashalf their workforce isenrolled.

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No annuitisation requirements. companies, orCIIs, via closed oropen, externallyadministeredpension funds.

voluntary foremployees, onlyfor those who arenot affiliated toany other pensionplan already.

Employee contributions aredeductible up to 12% ofsalary, and up to R$ 2,400per year only.

Earnings are tax-free, aslong as investment kept forat least ten years. Ifwithdrawn before, there is atax penalty, calculated as apercentage of the total taxdeducted, decreasing withthe date of liquidation.


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Canada OAS minimum retirementage of ?, before whichbenefits cannot bereceived.

Run on a PAYG-basis with reservefunds by agovernmental entity

Offers definedbenefits

The plan ismandatory for ??,

CPP and QPP minimum retirementage of ?, before whichbenefits cannot becommuted.

Earnings–relatedscheme run onPAYG basis

Partial funding inthe case of CPP.

Reserve fundadministrator is agovernment entity.

all public and privatesector employers,employees, and theself-employedmandatorilycontribute

RPP Benefits cannot bereceived before the ageof 65 in most cases.

Plan members whoterminate anemployment contractmay retain a deferredpension with theiremployer, buy anannuity from aninsurance company,transfer the commutedvalue to anotheremployer’s plan, ortransfer the commutedvalue to their personalRRSP from where itcan be consumed (seebelow).

Funded.

May or may notprovide guarantees.

Plan administered via aclosed pension fund orby an insurancecompany.

Pension funds may beexternally managed.

Participation for bothpublic and privatesector employers andemployees isvoluntary, thoughsome plans makeparticipation ofemployeesmandatory.

Employer and employeecontributions are tax-exempted, up to 18% ofearnings or C$ 13,500.

Earnings are tax-exempted.

Benefits paid in the form ofannuities are taxed as income.

Lump-sum payments are taxedas income, but up to C$20,000 can be withdrawn as alumps-um tax-free for twopurposes: purchasing aprincipal residence orfinancing education.

RRSP Can be liquidated at Funded, DC plans. Plan administered via a Voluntary for Employer and employee

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any time beforeretirement subject to notax penalty.

They offer nofinancial orbiometric guarantee.

closed pension fund, abank deposit, or acollective investmentscheme.

employers, and allemployees

contributions are tax-exempted, up to 18% ofearnings or C$ 13,500, less anestimate of the amountcontributed by the individualand on the individual’s behalfto an RPP.


Benefits paid in the form ofannuities are taxed as income.

Lump-sum payments are taxedas income, but up to C$20,000 can be withdrawn as alumps-um tax-free for twopurposes: purchasing aprincipal residence orfinancing education.

Individualannuities

Funded. DB or DC. Administered by lifeinsurance companies.

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Chile Mandatoryindividualaccountpension plans

Minimum retirementage of 65 years for menand 60 years forwomen, before whichaccount balance cannotbe cashed out.

Early retirementpossible but subject tocertain legal requests

20 years of work arerequired to qualify fora minimum pension

Only funded, DCplans permitted inaccumulation stage,but funds must earn areturn within a bandcalculated around theaverage of thepension fundindustry.

At retirement, theaccumulated balancemay be annuitised,drawn as a lump-sum,or as a gradualwithdrawal.

Governmentguarantees minimumpension.

Benefit payment inthe form of annuitiesmust be contractedwith insurancecompanies. Otherbenefit options can bemanaged by the AFP.

Affiliates can chooseinsurance company inthe case of annuitiesare chosen as form ofbenefit.

Plans administered by anopen pension fund only.

Pension plan managingcompany is a specialisedfinancial institutiondedicated exclusively tothat purpose(Administradora deFondos de Pensiones -AFP).

Each AFP may offer twokinds of pension funds,one fixed-income and onebalanced. Only pensionersand about to be pensionerscan choose the fixed-income fund.

There are no restrictions inswitching between openpension funds or AFPs.

Employers: mandatorycontribution.

Employees: mandatoryfor all salariedemployees (includingpublic sector workersand self-employed).

The law sets thesedeposits at a rate of10% of the monthlytaxable salaries andincomes, up to amaximum amount ofabout US$ 1,650

The part of salaries andincomes earned whichis used to paycontributions is exemptof income tax

Voluntary Minimum retirement Only funded, DC Plans administered by an Employers: voluntary The part of salaries and

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individualaccountpension plans

age of 65 years for menand 60 years forwomen, before whichaccount balance cashedout.

Early retirementpossible but subject tocertain legal requests

20 years of work arerequired to qualify fora minimum pension

This contribution is nottaken into accountwhen deciding whethersomeone is entitled tothe minimum pensionstate warranty. Alsothis contribution is nottaken into accountwhen calculating thetransfer of funds to theindividual accountsfrom the insurancecompanies, because ofthe disability andsurvival pensions

plans permitted inaccumulation stage,but funds must earn areturn within a bandcalculated around theaverage of thepension fundindustry.

At retirement, theaccumulated balancemay be annuitised,drawn as a lump-sum,or as a gradualwithdrawal.

There are noguarantees.

Benefit payment inthe form of annuitiesmust be contractedwith insurancecompanies. Otherbenefit options can bemanaged by the AFP.

Affiliates can chooseinsurance company inthe case of annuitieschosen as form ofbenefit.

open pension fund only.

Pension fund managingcompany is a specialisedfinancial institutiondedicated exclusively tothat purpose(Administradora deFondos de Pensiones -AFP).

Benefit payment may beoutsourced to an insurancecompany

There are no restrictions inswitching between openpension funds or AFPs.

contributions

Employees: voluntary

incomes earned whichis used to paycontributions is exemptof income tax

17




Colombia Mandatoryindividualaccountpension plans

Required minimumcapital.

The required minimumcapital must guaranteea pension of no lessthan 110% of a legalminimum wage.

It is possible to cashout only the amountexceeding the capitalrequired for financing apension of not less than70% of the averagesalary of the last tenyears, but the pensioncannot be less than110% of a legalminimum wage.

Only fully-funded,DC plans permittedin accumulationstage. Funds mustearn a minimumreturn calculated bythe supervisor(SuperintendenciaBancaria).

At retirementaccumulated balancemust be annuitised ordrawn as a gradualwithdrawal.

Governmentguarantees minimumpension equivalent toa legal minimumwage.

Benefit payment inthe form of lifeannuities may becontracted withinsurance companiesand programmedretirement withAFPs.

Plans administered by anopen externally managedpension fund only.

Pension plan managingcompany is a specializedfinancial institutiondedicated exclusively tothat purpose and to theadministration ofseverance and otherresources from socialsecurity regardingpensions (Administradorade Fondos de Pensiones -AFP).

Each AFP may offerdifferent kinds of pensionfunds. As to day onlymandatory plans have beenauthorised.

A three year restriction inswitching between thepublic social securitysystem and the individualaccount system. Switchingbetween AFP is possibleevery six months.

Mandatorycontribution: 13.5% ofmonthly salary.

Employers (75%) andemployees (25%):mandatory contribution(including public sectorworkers). Self-employed workers mayvoluntarily affiliate.

Tax-free.

Social securitypension

Minimum retirementage of 55 for womenand 69 for men and aminimum of 1,000weeks of laboured

Financed on a PAYGbasis.

DB plan

Plan administered bysocial security institute.

Mandatorycontribution: 13.5% ofmonthly salary.

Employers (75%) and

Tax free

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time. employees (25%):mandatory contribution(including public sectorworkers). Self-employed workers mayvoluntarily affiliate.

Voluntaryindividualaccountpension plans

Benefits may bereceived according toregulations of thespecific plan. Benefitpayment in the form oflife annuities, as a lumpsum or as a gradualwithdrawal.

DC plans notmandatory.

There are noguarantees.

Benefit payment inthe form of lifeannuities must becontracted withinsurance companies.Other benefit optionsmay be managed byAFPs or Trustcompanies.

At retirementaccumulated balancemay be annuitised,drawn as a lump sumor gradualwithdrawal.

Affiliates mustchoose insurancecompanies in caseannuities are chosenas form of benefit.

Plans administered by anexternally managedpension fund only.

Pension fund managingcompany is a specializedfinancial institutiondedicated exclusively forthis purpose. The onlyfinancial institutionsauthorised are:Administradora de fondosde Pensiones - AFP,Insurance Companies andTrust Companies.

There are no restrictions inswitching between openpension funds.

Pension funds may beopen or closed. There areno public pension funds.

Closed pension funds:employers andemployees voluntarilycontribute.

Open pension funds:employers andemployees voluntarilycontribute

Contributions aredeductible fromincome tax up to 30%of earnings if and onlyif contributions remainin the fund for at leastfive years.

Benefits are tax-free.

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Costa Rica First pillar:Social securitysystem.Disability; Old-age and DeathRegime (IVM)

Minimum retirementage before whichbenefits from thepension plan cannot bereceived: 61 years and11 months for men, 59years 11 months forwomen. In addition, theplan member is subjectto a minimumcontribution period of20 years

PAYG Plan administered bysocial security institute

Mandatory for bothemployer andemployee

Total contributions areincome tax exempted

Second pillar:ComplementaryPensionMandatoryRegime

Minimum retirementage before whichbenefits from thepension plan cannot bereceived: 61 years and11 months for men, 59years 11 months forwomen

Pure definedcontribution schemes,in which the memberemployee bears therisk. Funding basedon contributions andthe yield earned onthe accumulatedbalance of anindividual account.The State guaranteesthe amount ofcontributions (not thereturn) in case of abankruptcy of themanaging financialcompany.For the benefitpayment the memberdecides betweenbuying a life rentthrough an insurancecompany or having

There is a legal separationof the fund (externalfunding). Pension fundsare defined as legallyindependent entities,recognised by theregulation law, establishedmainly for the purpose ofproviding retirementbenefits. They are openpension funds, since theysupport retirement plansthat do not havemembership restrictions.

The specific financingvehicle is the pensionfund, managed as anindependent legal entity bythe pension fundmanagement companies(operadoras). They managethe pension for the benefit

Eligibility: all thesystem is based onpersonal pension plans.Employer: mandatorycontribution, cannot setup plans.Employee: mandatorycontribution.

Mandatoriness isdetermined at the levelof legislation.

Total contributions areincome tax exempted.The earnings (interestincome and capitalgains) are exempted ofincome tax

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an annuity pension. of retail investors, whereeach of these investorsholds title to a percentageof the value of the assetsmanaged by the financialcompany. They carry outaccount management indefined contributionschemes, assetmanagement and benefitpayment. These entitieshave to be licensed by theregulatory authority, andare subject to a minimumcapital requirement andperiodical financialreports.

Third pillar:ComplementaryPensionVoluntaryRegimes

Minimum retirementage of 57 years, exceptin the case of disability.Workers are notallowed to receivebenefits or consume theaccumulated balancebefore retirement

Fully funded puredefined contribution.Same characteristicsof the second pillar.At retirement thebenefits can be paidas a lump sum,annuity or withdrawnin a gradual way.

Same characteristics as thesecond pillar. In this casethe regime is structured ina contractual form inwhich the member enters,on a voluntary basis, into acontract with theManagement Company.

Eligibility: all thesystem is based onpersonal pension plans.Occupational plancould exist onvoluntary basis. Theplans could bevoluntary employer-sponsored or non-sponsored pensionplans.Employer: voluntary tocontribute, cannot setup.Employee: voluntary

Contributions areexempted up to 10% ofincome in the voluntaryscheme. The earnings(interest income andcapital gains) areexempted of incometax

Fourth pillar:Non-contributionRegime

Provides a minimumanti-poverty pension,means tested

Financed directlyfrom generalrevenues

Publicly managed: SocialSecurity Institute

21




CzechRepublic

Publicpension plan

Minimum retirementage is being raisedgradually in 2007 of 62for men and 57-61 forwomen (depending onthe number of childrenreared), before whichonly early retirementmay be taken (2-3years prior toretirement, with 25years of insurance andreduced pensions)

25 years ofcontributions is neededto qualify for a statepensions

Financing on aPAYG basis.

DB system with stateguarantee

Administered by theMinistry of Labour andSocial Affairs

Mandatory tocontribute for bothemployee andemployer

Voluntarypension plans

The balance can bepaid out at age of 60years

Minimum 36-60calendar month –stipulated by thepension plan – ofcontribution period isneeded to qualify for apension

Only, fully-funded,DC schemes inaccumulation stage.

No guarantees onaccumulation stage.

On retirement thebalance can be paidas lump-sum paymentor annuities.

Plans administered viapension funds,managed by specialisedjoint-stock companies

Voluntary for bothemployers andemployees

State and individualcontributions are taxexempt, their yields aresubject to 15% tax.

Contributions ofemployers andemployees are tax-deductible under certainconditions stated bylaw.

Benefits are tax exempt.

22


balance liquidityFunding and risk bearing Administration Participation Tax treatment

Denmark Publicpensionsystem

Minimumretirement age is67, beforewhich benefitscannot bereceived.

FP financed on a PAYG basis out oftax revenues. ATP and SP are funded.

FP: flat rate benefit

ATP: benefit based on investmentincome on contributions, withguarantees on returns. Pensions arepayable as with-profits annuities,with guarantees that payments willnot decline from the initial level.

SP: earnings-related. 10 year annuity.

FP and SP systemsadministered by agovernment agency.

ATP is managed bya public pensionfund.

Employers: mandatorycontribution to FP andATP system only.Employees: mandatoryparticipation andcontribution to all threesystems (FP, ATP, andSP) of all people residentor working in Denmark(including self-employedand public sectorworkers). For ATP,mandatory for employeesworking more than 9hours a week.

Occupationalpensionplans

Minimumretirement age is60, beforewhich benefitscannot bereceived.

On leaving ajob, workerreceives atransfer value,which can beconsumed ortransferred to anew plan.

Fully-funded, DC plans usually inaccumulation stage.

Lump-sum payments permitted.

Plans administeredvia closed pensionfund, or by aninsurance company.

Pension funds maybe externallymanaged.

Employers: compulsoryfor those covered undercollective bargainingagreements.

Employees: compulsoryfor those working inareas covered bycollective bargainingagreements.

Pension contributions are taxedat 8% gross. Tax-deductiblecontributions to lump-sumschemes are allowed only up toa combined employer-employeetotal contribution of DKK34,000.

Earnings on pension accounts inpension funds and insurancecompanies are taxed during theaccumulation phase on real(inflation-adjusted) returnsabove 3.5%.

Lump-sums payments are taxedat a rate of 40%, annuities aretaxed at regular income tax rate.

Personalpensionplans

Only fully-funded, DC plans inaccumulation stage.

Annuitisation or drawdown over aperiod of ten years required for fulltax deductability.

Plans administeredvia an open pensionfund, externallymanaged by aninsurance companyor a bank.

Voluntary take-up by anyemployee.

Maximum deduction is 34,000DKK annual contributions.

23



El Salvador IndividualPensionSavingsAccounts(PSA)

Minimumrequirement age of 60for men and 55 forwomen.

25 years ofcontinuous ordiscontinuouscontributions; or 30years of continuousor discontinuouscontributions; orenough balance in thesavings account tofinance a percentageof the mean basicsalary.

Also includesinsurance againstpremature death anddisability due tocommon (non work-related) risks.

Funded scheme

Financial Guarantee: Minimumreturn calculated as an average ofthe industry

Risk-bearing: if minimum returnis not achieved by financialinstitution, the partners of the firmmust provide the differencebetween the actual return and theaverage of the industry.

The Government guaranteesminimum pension.

Forms of benefit payments:• Annuities (signing a contract

with an insurance companyand transferring the PSAaccount balance)

• Programmed withdrawals

A lump sum can be paid if workerdoes not meet requirements toacquire minimum pension andaccount balance is not enough tofinance 2/3 of minimum pensionto the worker or his survivors.

Upon retirement workers mayalso withdraw in a lump sum their"excess savings"

Financial vehicle:Pension Fund

Manager Pension FundAdministratorCompany (AFP)

The fund and the AFPare separate entities.This guarantees thateven in case ofbankruptcy, the PSAthat constitute the fundcan be distributedamong the rest of theAFPs.

Oversight: PensionSuperintendence(Government Agency)

Mandatorycontributions for bothemployees andemployers in privateand public sectors.

Voluntarycontributions for self-employed workers(must absorb bothemployee andemployer contribution)

Workercontributions aredeductible forincome taxpurposes.

The return on thePSA is tax-free.

24




Finland The basicstate pensionscheme(nationalpension)

Minimum age is 65before which benefitscannot be received.

PAYG basis

DB

The social insurance Compulsory for allcitizens.

Employer contributionsare tax-deductible

Benefits taxed asincome

Statutoryoccupationalschemes

Minimum age is 65before which benefitscannot be received,although earlyretirement is possible.

On leaving onescheme, accruedbenefits are credited byemployer in newscheme.

Mixed PAYG andfunding elements.

DB

Administered by insurancecompanies, pensionfoundations and pensionfunds.

Employers:compulsory to join anoccupational scheme orto set one up

Employees:compulsorymembership



Voluntaryoccupationalschemes

Benefits are prescribedin rules.

On leaving onescheme, accruedbenefits may be vesteddepending on the rules.

DBFunded

Administered by pensionfoundations pension fundsor by life insurancecompanies.

Voluntary, additionalpension plan



Individualpension plans

Funded Plans administered by lifeinsurance companies.

Taxed as income

25




France State pensionscheme

Age at retirement varyaccording to thescheme but is generally60 with 155 insurancequarters completed.

Pay-as-you-go basis

Earning related: 50%of the average annualsalary on whichcontributions werebased during the 15highest-paid years.

Employees:compulsoryFor private sectoremployees’ schemes,public sector worker’sand self-employedpersons

Social contributionslinked to staffremuneration aredeductible from pre-taxprofits.

Pensions are taxabledepending on thepension plan andannuity scheme.

Occupationalschemes

Pay-as-you-go basisARRCO for non-managerial staffAGIRC formanagers.

Earning related basis

The pensions organisationsare managed by theemployer’s and employeesorganisations.

On 1 January 2000 theseschemes fell within thescope of the communityregulation co-ordinatingsocial security schemes.

Compulsory for allprivate-sectoremployees

Employers’andemployees’contributions are tax-deductible.Benefit will be taxed asincome.

Mutualassociationschemes

Funded. NormallyDB.

Plan administered by amutual association,regulated by code ofmutuals.

Employees: Voluntary

26




Germany State pensionprovision

Legal retirement age is65.

Pay-as-you-go basis

Benefit based on thenumber of years ofcontribution and thelevel of thecontributory incomein relation to theaverage income

Managed by the state, orby professionalassociations.

Compulsory for civilservants, workers,farmers and certaingroups of self-employed personsunder differentpension schemes.

Some groups of self-employed people (egarchitects, lawyersetc) are insuredcompulsorily inpension schemesprovided byprofessionalassociations.

Employees who areinsured with aprofessionalassociation areexempted fromcompulsory insurancefrom the state.

Employers’ contributionsare deductible fromtaxable income asoperating expenses.Employees’ contributionsare tax- deductiblepension contributions upto a ceiling.

Annuities are partly taxed(yields) depending on theage of retirement (eg:retirement age65=>taxable income is27%).

27




Employer andoccupationalschemes

No fixed age. Funded. DB schemeexclusively.

Administered by thesponsor via the bookreserve system, throughsupport funds (legallyseparate but withoutirrevocable rights), closedpension funds (subject toinsurance regulation), orby an insurance company.

Book reserve schemes andsupport funds must beinsured against bankruptcysince 1974.

Employer: Voluntary

Employee: voluntary

Book reserves:Employers’ contributionsreduce taxable profits.Pension payments areconsidered operatingexpenses which offsetsthe increase in profitsgenerated by the releaseof reserves.

Support funds:Employers contributionsare deductible as businessexpenses up to certainlimits depending on thetype and average level ofbenefits promised.Benefits are taxed asincome.

Pension funds:Employers contributionsare taxed at a flat 20percent rate.Benefits - if paid asannuities - are partlytaxed (see statepensions). Lump sumpayments are tax free.

Direct insurance: seepension funds

28




Socialsecuritypension

Retirement age is 65for men and 60 forwomen.It is possible to takeearly or deferredretirement

Pay-as-you-goprinciple:employees’ andemployers’contributions.

Benefits depend onthe amount ofcontribution.

1. Compulsory statepension.Basic general andspecial statutoryschemes foremployees, the self-employed, civilservants, and the like,seamen and farmers.2. Compulsorystatutorysupplementary schemesfor employees, the self-employed, and civilservants and the like.

OccupationalPensions

Funded.

DB plan

Plans administered byinsurance companies.

Voluntary at theemployer’s discretion.

Employees’ andemployers’contributions aredeductible fromincome.Capital gains andinterest are tax-exempt.

Pensions are taxed inthe same way as otherpersonal income.

Greece

Personalpension Plan

Funded.

Depends on thecontract.

Plans administered byinsurance companies.

Voluntary. Up to 15% of thepremiums paid annuallyare tax-deductible.

29




Hungary Socialsecurity

The minimumretirement age will be62 for both men andwomen, from 2009,introduced gradually,before which decreasedbenefits can bereceived, but no earlierthan 5 years.

20 years of work arerequired to qualify fora state pension

PAYG system

Benefits areguaranteed by thestate central budget

Administered bygovernment agency

Employers: mandatorycontribution

Employees: mandatoryparticipation andcontribution

Tax deduction for thecontributions is 25%

Benefits are taxexempted until 2013,after that taxable, butthe benefits will bedefined on the base ofthe gross salary insteadof the actually used netsalary. .

Mandatorypension plans

The retirement age ofthe public pensionsystem is applied,before which thebalance cannot beliquidated

Only fully-funded,DC in accumulationstage.

Minimum level ofpension is guaranteedby the GuaranteeFund and – in lastcase – by the state incase of more than 15years contribution

Minimum rate ofreturn requirement isapplied on pensionfunds, based on theLong-termgovernment bongindex (MAX).

Retirement benefitsmust be paid in the

Plans administered byclosed or open pensionfunds.

Both may be externallymanaged by banks andinsurance companies.

The pension fund mayitself transform theaccumulated balance intoan annuity (self-administrated fund) or maycontract with an insurancecompany annuity benefits(externally managed).

Employers: Voluntaryto set up pension plansand contribute

Employees: Mandatoryto join a pension fundfor new employeesafter June 30, 1998.Those employed priorto this date could joinvoluntarily untilAugust 31, 1999. Thelatter, may re-enter tothe exclusively publicsystem until the end of2000.

Tax deduction formandatorycontributions is 25%,supplementarycontribution paid into amandatory plan subjectto the same rules asvoluntary plans

Earnings are tax-exempted

Taxable with discount

30




form of an annuity.Workers can chooseinsurance company.Lump-sum possibleabove minimum levelof annuitisation.

Voluntarypension plans

The retirement age ofthe public pensionsystem is applied afterwhich members canchoose betweenannuity and lump sum

After 10 years ofmembership thebalance can beliquidated, but subjectto personal income tax

Only fully-funded,DC schemes inaccumulation stage.

No guarantees.

Retirement benefitscan be paid in theform of lump-sum orannuity.

Plans administered by aclosed or open pensionfund.

Both may be externallymanaged by banks andinsurance companies.

The pension fund mayitself transformaccumulated balance intoan annuity (self-administrated fund) or maycontract with an insurancecompany (externallymanaged).

Employers: Voluntaryto set up and contribute

Employees: Voluntary

Employee contributionfrom taxed income, but30% of pay-indeductible as taxdiscount, employercontributions are tax-exempted up to 115%of minimum wage


Benefits are tax-exempted

31




Iceland Socialsecuritysystem

Minimum retirementage is 67, beforewhich benefits cannotbe received.

Flat pension.

Funded on a PAYGbasis out of taxrevenue.

Administered bygovernment agency.

Employers:

Employees: mandatoryfor all employees in theprivate sector

Governmentemployeespensions

Minimum retirementage is 70, beforewhich benefits cannotbe received.

Flat pension

Fully-funded

Administered by a publicpension fund.

Employer: mandatory(government)

Employee: mandatoryparticipation

Occupationalpensionsystem

Funded.

Benefits are calculatedon the basis of numberof years contributedand investment returns.

Benefits must be paidas a lump-sum annuityand there is no lumps-sum.

Administered via a closedor open pension fund only.

Employer: mandatorycontribution to theoccupational pensionfund covering itsemployees

Employees: all wage-earners and the self-employed are obligedto belong to a pensionfund.

Individualpensionaccounts

Withdrawal cannotbegin before age 60,even if contractterminated.

Contracts can beterminated on sixmonth’s notice.

Funded, DC.

Benefits are calculatedon the basis of numberof years contributedand investment returns.

Benefits must be paidas a lump-sum annuityand there is no lumps-sum.

Administered via openpension funds, themselvesmanaged by differentfinancial institutions(banks, insurancecompanies) or directlyadministered by insurancecompanies.

Employees: voluntary Up to 2% of aemployees’ salary is taxdeductible, which willbe matched by 0.2%contribution fromemployer.

32




Ireland Socialsecurity

Financed on a PAYGbasis

Civil servicepensionscheme

Minimum retirementage is 67, before whichbenefits cannot bereceived.

Financed on a PAYGbasis, or funded via aclosed pension fund,or an insurancecontract.

Earnings related

Qualified externalmanagers including banks,insurance companies andpension or investmentconsultants.

Employer: mandatory(central and localgovernments)

Employees: mandatory

Private sectoroccupationaland employerpension plans


Maximum retirementage is 70.

Employees with morethan 5 yearsmembership areentitled to preserved,deferred benefit.Alternatively, they maytransfer accruedpension right oraccount balance to anew employer or to alife assurance companyretirement bond.

Financed on a PAYGbasis, or funded.

Both DB and DCpossible.

Administered via a closedpension fund, or by aninsurance company.

Qualified externalmanagers including banks,insurance companies andpension or investmentconsultants.

Employer: voluntary

Employee: voluntary

33




Italy Socialsecuritypensions

Minimum retirementage of 65 years for menand 60 years forwomen, before whichfull benefits cannot bereceived.

Early retirementpossible up to 57.

Pay-as-you-go basis

Pensions are theresults of the productof the contributionsand the actuarialfactors calculatedprovided on the basisof the beneficiary’sage.

Employer: compulsorycontribution

Employee: mandatory

Employers’contributions aredeductible from pre-taxprofits as businessexpenses.Employees’contributions aredeductible from taxableincome.Benefits are taxed asincome.

Occupationalpension plans

Minimum retirementage same as publicpension system (65 formen, and 60 forwomen), but benefitscan be paid up to tenyears before thisstatutory age ifcontributions havebeen maintained for atleast 15 years.

Employees leaving acompany may drawdown the accumulatedbalance, transfer thebalance to the newemployer’s plan, orsign up a personalpension plan, but thelatter option is onlypossible if a closedfund is not operating inthe worker’s new

Mainly fully-funded,DC without anyguarantees, inaccumulation stage.

DB formula exists forself-employed.

Beneficiaries can takeup to 50% in a lumpsum, and theremaining part inannuities.

Administered viaexternally managed closedpension funds only. Theycan be created at differentlevels: company or groupcompanies, industrialsector.

Closed pension fund assetsmust be managed byfinancial companies.

Payment of pensionbenefits and any additionalinsurance cover must beentrusted to insurancecompanies.

Employer: adhesion offirms is linked to thelabour contracts theyapply.

Employee: Voluntaryon the part of workers.

Contributions topensions funds are non-taxable up to certainlimits.87.5% of the benefitsreceived in the form ofan annuity are taxable,and lump-sum benefitsare granted favourabletax treatment.Pension funds earningare subject to an 11%tax rate.

34




sector.

Personalpension plans

Minimum retirementage same as publicpension system (65 formen, and 60 forwomen), but benefitscan be paid up to tenyears before thisstatutory age ifcontributions havebeen maintained for atleast 15 years.

Funded, DC withoutany guarantees.

From 2001, tax-favoured pensionplans will beavailable in the formof insurance contract.

Beneficiaries can takeup to 50% in a lumpsum, and theremaining part inannuities.

Administered via openpension funds only.

Open pension fund assetsmust be managed byfinancial companies(banks, insurancecompanies, or brokeragefirms).

Payment of pensionbenefits and any additionalinsurance cover must beentrusted to insurancecompanies.

Employee: Voluntary From 2001, if openfunds comply with thesame age requirementsfor the granting ofbenefits and to the sameconstraints to paymentof lump sum instead ofannuities, they will begranted the samefavourable taxtreatment than closedpension funds.

35




Japan Publicpension plan

Lump-sumplans

Lump-sum paid onleaving a company.

Funded.

Lump-sum benefits

Plans normallyadministered by employersvia book reserve method.

Not required to insureagainst bankruptcy.

Employer: voluntary Employer deduction islimited to 40% of thevalue of the accruinglump-sum benefitpayable in the event ofvoluntary termination

TQP No vesting orportability regulation.

Funded. DB only.

Benefit in the form oflump-sum or annuity.

Administered viaexternally managed closedpension fund only.

Pension fund assetmanagers include banksand insurance companies.

Employer: voluntary Contributions are tax-deductible

Earnings are tax-exempt

EPF Vesting after onemonth. If leaving acompany after twentyyears of contributions,must defer benefits.

If leaving the company,before twenty years,must purchase anannuity from PensionFund Association

Funded. DB only.

Benefits up to theminimum level (30%above what isguaranteed by thepublic system) mustbe in the form of anannuity.

Lump-sums are notpermitted.

Administered via closedpension fund only.

Employer: if contractout of public system,must set-up andadminister EPF plan.

Employee: compulsorymembership

Contributions are tax-deductible

Earnings are tax-exempt

IndividualAnnuities

36




Korea Nationalpensionscheme

Retirement age is 60(55 for miners andfishermen) , and it isplanned to increasegradually to 65 in2033.

15 years ofcontributing is requiredto be qualified for astate pension.

PAYG system

DB

Administered by theNational PensionCorporation

Compulsory foremployees inworkplaces with 5 ormore workers, self-employed in the ruralarea, farmers andfishermen.

Voluntary for self-employed in the urbanarea, housewives andstudents.

The employers of theemployees above mustcontribute.

Employee contributionsare taxed.

Earnings and benefitsare tax exempt.

Mandatoryseparationallowance

Allowances are paid bythe company at themoment of the departof the employee(including retirement),usually in lump sum

Partially funded Administered byemployers via bookreserve method.

Mandatory foremployees

Contributions are taxexempt

Earnings are taxable

Benefits taxable, but ata low level.

Personalprivatepension plan

To be qualified for taxdeductions, participantscannot withdraw thebalance until the age of55, and they have tocontribute no less than10 years

Funded

Participants canchoose betweenannuity and lumpsum

Administered by insurancecompanies, banks,investment and trustcompanies

Voluntary EEE, with limits.

37



Socialsecuritypension

Retirement age is 65 forboth men and women.With 40 yearscontributions earlyretirement is possiblefrom the age of 57.Retirement can bedeferred to 68 , in whichcase the amount of thepension will be increasedby an actuarial factor.

Benefits can only beannuities

Pay-as-you-goprinciple.

Employee, employer andstate contributions.

Benefits are the result of theproduct of the contributionsand the actuarial factorscalculated on the basis of thebeneficiary’s age.Benefits are indexed to thecost of living and adjusted inline with pay trends.

Compulsory statepension: onlyavailable to thosewhose earningsare below thesocial-securitythreshold.

EET

OccupationalPensions

Retirement age left to theemployer’s discretionand is often higher thanthat of the generalscheme.

Funded. Mainly DB, but DCalso exist.

Both annuities and lump-sum are possible

Administered byemployers via bookreserve, closed pensionfunds or administereddirectly by life insurancecompanies.

Book reserves are mainlyused.

Book reserved plans arenot required to insureagainst insolvency.

Voluntary-This type ofscheme is onlyavailable to thoseearnings areabove the socialsecurity threshold.

The employees’contributions are onlytax-deductible withincertain very narrowlimits.Lump sum paymentsreceive preferential taxtreatment.

Luxembourg

Personalpensionplans

Funding: life insurancecompanies

Benefits depend on thecontract.

Annuities or lump-sum

Voluntary Premiums are tax-deductible under certainconditions.

38




Mexico Mandatoryindividualcapitalisationaccounts

Balance can betransferred betweenpension every year butcannot be consumedbefore retirement, at65.


At retirement workerscan use their balancesto buy an annuity orto program gradualwithdrawals.

Governmentguarantees aminimum income, anannuity equal tominimum salary inthe country in 1997,indexed to inflation.

Administered viaopen pension fund only.

Open pension funds aremanaged by specialisedfinancial intermediariesdedicated exclusively tothat purpose (SIEFORES).

Employer: mandatorycontributions for allemployers

Employees: mandatorycontributions

Government:mandatorycontributions and asocial fixed quota forevery day worked

Employer contributionsare deductible from pre-tax profit

Employee contributionsare taxed as income

Earnings: interest gainsare taxable except fortax-exempted securities(e.g. governmentbonds)

Benefits are tax-exempted up to acertain limit, then aretaxable as income

Voluntaryindividualcapitalisationaccounts

Withdrawals every sixmonths.


Withdrawals can bemade once every sixmonths.

Administered viaopen pension fund only.

Open pension fundsadministered byspecialised financialintermediaries dedicatedexclusively to that purpose(SIAFORES).

Employer: voluntarycontributions

Employees: voluntarycontributions

Employer contributionsare non-deductible

Employee contributionsare taxed as income

Earnings: interest gainsare taxable except fortax-exempted securities(e.g. governmentbonds)

Benefits: withdrawalsare tax-exempted.


39




Netherlands Publicpension plan

Minimum retirementage is 65

PAYG

DB

Compulsory

Occupationalschemes

Minimum retirementage is 65.

Employees leaving afirm can opt fordeferred benefits, orcan transfer accruedrights to the newemployer’s plan.

Funded.

Mainly DB

Plans administered by aclosed pension fund(foundation) or aninsurance company.

Employers:compulsory undercollective bargainingarrangements and bystatute in certain sector.

Employees: mandatory

Contributions are taxdeductible.

Earnings are tax-exempt.

Pension benefits aretaxed as income.

Annuities Funded.

DB

Plans administered by lifeinsurance companies.

Employees: voluntary Taxed as normalincome

40




New Zealand Socialsecurity –New ZealandSuperannuation

Minimum retirementage of 65, before whichbenefits cannot beearned.

Financed on a PAYGbasis from taxrevenue.

Flat benefit.

Non-contributorysystem.

All individuals residentin New Zealand (atleast for ten years fromage 20) qualify for thispension benefit.

Occupationalsuperannuation plans

No minimumretirement age.

No vesting,preservation, orportability regulation.

Upon voluntaryresignation, mostoccupational schemesreturn the member’scontributions, usually(but not always) withinterest.

Funded. Both DB andDC, but DCpredominant.

Benefits paid aslump-sum or annuity.

Administered by theemployer via the bookreserve method (minority),a closed pension fund(trust form), oradministered directly by aninsurance company.

Under the SuperannuationAct of 1989 book reservemethod cannot beregistered withGovernment Actuary.

Employers: voluntary

Employees: voluntaryparticipation, exceptfor some of the largerschemes, where it iscompulsory.

Neither employer noremployee contributionsare tax-deductible.


Benefits exempt fromincome tax.

Personalsuperannuation plans

No minimumretirement age.

Funds invested can beretrieved at any time atno penalty (no taxadvantages either).

Funded.

Benefits may be paidas lumps-um orannuity.

Administered via openpension funds, by banksand insurance companies.

Employees: voluntary Contributions are nottax-deductible.


Benefits exempt fromincome tax.

41




Norway NationalInsurancescheme


Financed on a PAYGbasis.

DB only: system hasa flat rate componentand an earnings-related component.

System administered bygovernmental agency.

Employers: mandatorycontribution to system

Employees: mandatoryparticipation of allpeople resident orworking in Norway(including self-employed and publicsector workers)


Funded.

Companies mustchoose between DCand DB plan.

Most DB plans arefinal salary schemes.

Administered via a closedpension fund or lifeinsurance companies in thecase of DB plans. Banksand investmentmanagement companiescan also administer DCplans.

Employers: voluntaryto set up.

Employees: mandatoryif the employer hasestablished anoccupational pensionplan.

Premiums paid byemployers andemployees on earningsup to 12G are taxdeductible.

Employers are liable forsocial security taxes oncontributions forpension plans startedafter 1988.

IndividualPensionAccounts

Funded.

Many products havea return guarantee, upto 3%.

Annuitisation atretirement iscompulsory.

Administered via a closedpension fund, lifeinsurance companies,banks or investmentmanagement companies.

Voluntary take-up byany employee.

Maximum 40,000 NOKannual contributions.

42



Peru Privatepensionsystem (SPP)

Minimumretirement age of65, before whichaccount balancecannot be cashedout

Only fully funded, DCplans permitted inaccumulation stage, butfunds must earn a returnwithin a band calculatedaround the average of thepension fund industry.Hence, AFPs must have areserve account to meetshortfall in performance.

Government does notguarantee minimumpension yet.

Benefit payment in theform of rent must becontracted with insurancecompanies.

Affiliate can choose aninsurance company in thecase that rent be chosen asform of benefit.

Plans administered by anopen, externallymanaged pension fundonly.

Pension plan managingcompany is a specializedfinancial institutiondedicated exclusively forthat purpose(Administradora deFondos de Pensiones -AFP).

Each AFP may offer onetype of pension fund.

There are no restrictionsin switching betweenAFPs.

Eligibility: Personal pensionplan.

Participation: mandatory non-sponsored pension plan fordependent employees(employers must retain and paythe contributions). Voluntarynon-sponsored pension plan forself-employed.

NationalPensionSystem(SNP)

Minimumretirement age of65, before whichbenefits cannot bereceived.Benefits are relatedto years ofcontribution with aminimum numberof 20 years.

Financed on a PAYGbasis. DB plan.

Plan administered byState Pension RegulationOffice (ONP).

Eligibility: Personal pensionplan.Participation:Mandatory non-sponsoredpension plan for dependentemployees (employers mustretain and pay thecontributions).Voluntary non-sponsoredpension plan for self-employed.

43



Poland Old publicpensionplans

Minimumretirement age is 60years for womenand 65 for men

PAYG

DB systemGuaranteed by the state

Administered by agovernment agency,Social InsuranceInstitution (ZUS).

Employee: mandatory toparticipate and contribute forthose born before 1948.Employer: mandatory tocontribute

Contributions are taxdeductible, pensionspaid are taxed.

New PAYGpension plan

Minimumretirement age is 60years for womenand 65 for men,before whichbenefits cannot bereceived

PAYG system

Guaranteed by the state

Notional defined contributionsystem (NDC) based onindividual accounts.

Administered by agovernment agency,the Social InsuranceInstitution (ZUS).

Employee: mandatory toparticipate and contribute forthose born after 1948

Employer: mandatory tocontribute

Contributions are taxdeductible, pensionspaid are taxed.

Mandatoryprivatepensionplans

The retirement ageis 60 years forwomen and 65 formen, before whichpayments from theaccumulated fundcannot be received.

Only fully-funded, DC system inaccumulation stage.

State guarantee is applied throughas guarantee fund.

Rate of return guarantee isapplied, based on the average rateof return of the industry.

Retirement benefits must be paidin the form of an annuity.Members can choose annuitycompanies (draft legislation).

Administered via openpension funds, by thepension fundcompanies, butcontributions arecollected andtransferred to thepension funds by ZUS.

Mandatory to participate andcontribute for those who joineda pension fund.

To join a fund was mandatoryfor people born after 1968.Those born between 1949 and1968 had the right to join; thisdecision had to be made bySeptember 30, 1999.

Contribution andearnings are taxexempted

Benefits are taxable.

Occupationalpensionplans

Benefits can bepaid out from age60, except in casesof death orpermanentdisability

Fully-funded, DC only.

No guarantees

Administered by:- joint-stock or mutuallife insurancecompanies via groupinsurance policies- occupational pensionfund- open investment fund

Voluntary both for employerand employee

Contributions paid onbehalf of the employeeare deductible expensefor the employerContributions aretaxable by the personalincome taxEarnings and benefitsare tax-free.

44




Portugal Socialsecurity

Minimumretirement age is65, before whichbenefits cannot bereceived.

PAYG basis

Earnings-related,depending onnumber ofcontribution years.

Administered by a governmentagency (the National PensionsCentre) and the five regionalsocial insurance centres.

Mandatory contributions fromemployers and employees.

Employees: membership iscompulsory for all employeesand the self-employed.


Account balancecan be transferredto another plan or tolife insurancepolicies.

Funded. Both DBand DC.

Administered via closed,externally administered, pensionfunds, or directly by life insurancecompanies.

The administrators of closedpension funds can be insurancecompanies or specialised financialintermediaries dedicatedexclusively to this purpose(pension fund managementcompanies).

Self-administered pension fundsdo not exist.

Employer: voluntary

Employee: voluntary

Personalpension plans


Administered via externallyadministered, open pension funds.

The administrators of pensionfunds can be insurance companiesor specialised financialintermediaries dedicatedexclusively to this purpose(pension fund managementcompanies). These institutionscan manage both group andindividual account pension fundssimultaneously.

45




SlovakRepublic

Public pensions Financed on PAYGbasis

Managed and supervisedby the Ministry ofEmployment, SocialAffairs ad Family

Compulsory

Supplementarypensioninsurance

Funded system

Mainly DC system

Administered bysupplementary pensioninsurance companies

Voluntary for bothemployers andemployees, however,employees can notparticipate withoutemployer, thus, thissystem covers onlysalaried employees(neither civil servants,nor self-employed)

Employee’scontributions are free ofincome tax

Employerscontributions are taxdeductible expenses

Benefits are taxable

Individualpensioninsurance

Benefits are paidnormally atretirement age but inseveral cases it ispossible to have itbefore

Insured may choosebetween lump sumand annuities

Insurance contractprovided exclusively byinsurance companies

Voluntary foremployees

No tax incentives

46




Spain Socialsecuritysystem


Early retirement forworkers at least 60, ifcontributed before1967.

Financed on aPAYG basis.

Flat and earnings-related benefit, latterbased on salaryduring years prior toretirement.

Administered by agovernment agency.

Employees: mandatoryfor all workers in theprivate sector andworkers in publiccompanies.

Benefits taxed asincome.

Civil servantssystem (CPE)


Financed on aPAYG basis.

DB, based onnumbers of years ofservice and aregulatory base.

Administered by agovernment agency.

Employees: mandatoryfor all military andcivil servants workingfor the centralgovernment.



There is no minimumor maximum retirementage.

Employees in qualifiedplans are entitled todeferred benefit (nopreservationrequirements).Alternatively, they maytransfer accruedpension right oraccount balance to theirnew employer’spension plans.

Funded. DB or DC. Administered via anexternally-managed, closedpension fund, or directly byjoint-stock and mutual lifeinsurance companies.

Closed pension funds mustbe managed by a pensionfund managing company(bank or insurancecompanies).

Self-administered pensionfunds do not exist.

Employer: voluntary

Employee: voluntary


47



Basic scheme:AFP

PrefundedATP

Pension can beclaimed from theaged of 61. Andthere is no upperage limit.

1. Pay-as-you –go for 16% ofincome (basic scheme). 2. 2..5% of contributions go toindividual prefunded pensionaccount

1. Related to life earnings andyears of employment2. Related to premiums paid

Compulsory basicscheme + compulsoryfunded individualsavings scheme

Contributions are deductiblefrom taxable profits asbusiness expenses.Contributions paid byemployees are deductiblefrom taxable incomeBenefits are taxed asincome.

Life insuranceor mutualbenefit society

Funded. DB or DC

Book reserve Funded. Combination of DB andDC plans.

Pension is calculated on the basisof both final salary to a baseamount, and years worked

Employers make a provision inthe balance sheet, normallycorresponding to liabilities.The pension provision should besafeguarded in form of creditinsurance, a state guarantee or amunicipal guarantee.

Sweden

Pensionfoundation

Retirement age isgenerally 65 years,Taxation benefitsare only given topolicies with anearliest pensionableage of 55 years.

There is no ceilingon benefits paid.

Lump-sumpayments are onlypermitted whenannuity is very low

Managed by the employer as anindependent entity.

Administered by ajoint-stock ormutual insurancecompany.

Compulsory in thearea covered by therelevant collectiveagreement betweenemployer andemployee.

Contributions form theemployer are tax-deductible.Interest and capital gains aretax exempt.Pensions are taxed at a lowrate

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Personalpensions

Old-age pensionscannot normally bepaid out before theage of 55.

Related to premiums paid. Managed by lifeinsurancecompanies andbanks

Voluntary Payment of pensioninsurance premiums are tax-deductible, but formalrequirements must be met.Benefits are taxed asincome.The yield linked to thecapital of the policies istaxed within the insurancecompany.

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Switzerland State pensions(AVS)

Retirement age iscurrently 65 for menand 62 for women,but the latter isgradually beingraised to 64 in 2004,and 65 in 2009, withpossibility ofdelaying up to 70, orearly – reduced -pensions at 63

Financed on PAYG basis,from employee and employercontributions, investmentearned on the liquidityreserves and from federal andcantonal transfers.

State guarantee

Minimum pensions are seteach year

Organised andadministered on adecentralisedstructure: funds runby professionalassociations,cantons or thefederal governmentand supervised bythe Federal SocialInsurance Office

Mandatory tocontribute forboth employersand employees

Both employee and employercontributions are tax-exempt

Occupationalpensions(Prevoyanceprofessionelle –PP)

Retirement age of thestate pension isapplied, when thebalance is transferredto an annuity,however, funds maypermit individuals towithdraw theirbalance as a lumpsum

Funded. Earnings-related fullyfunded system.

Most funds are DC funds, DBschemes are representedmainly in the public sector

Guarantee fund wasintroduced in 1985.

Minimum nominal rate ofinterest is 4%.

Pension institutionscan be establishedas non-profitfoundations, co-operative societies,or as institutionsincorporated underpublic law (latteronly possible forfunds coveringemployees of thepublic sector)

Mandatory foremployers tooffer andemployees tojoin, who areolder than 23with annualearnings greaterthan themaximumpension from thepublic pillar

Contributions and earnings areincome-tax deductible

Benefits are fully taxed, butexemption from taxation for thefirst 15 years of the compulsorysystem

Individualpensions –savings “tied” toretirement

Benefits are paid onretirement, ondisability or death, asannuity or capitalpayment, but at theearliest 5 years beforethe retirement age ofpublic pensions

Funded. DC. Administered onlyby insurancecompanies andbankingfoundations that areauthorised inSwitzerland

Voluntary Savings can be tax-deductible upto 8% of the “co-ordinationearnings” used in the PP, for thosewho are covered by PPFor those who are ot covered byPP, tax free contributions can be20% of their revenue subject toAVS contributions (up to a limitof 40% of the upper limit of co-ordinated earnings)

Individual pensions–“free” savingsarrangements

Can be maintainedwith all financialinstitutions

Voluntary Less incentives as in the case oftied savings, depending on thesavings in the PP and tied savings

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a) flat-rate basicschemepension for elderly(over 65 years old)and disabled

non-contributory,financed directlyby government

Turkey public pensionschemes

b) earnings relatedschemesretirement age is 58for women and 60 formenbenefits are indexed towage growth andconsumer price index

pay-as-you-goprinciple

contributions fromemployee andemployer

administered by socialsecurity institutionsaccording to type ofemployment (workers,civil servants and selfemployed)

mandatory foremployees andemployers

contributions and benefitsare fully tax free

occupationalpensionschemes

a) schemes establishedaccording toTransitional Article 20of Social Security Law(No.506) establishedby banks, insuranceand reinsurancecompanies and tradeunions on behalf oftheir own staffmembers can fully optout social securityscheme (for workers)provided that a benefitequal to at least socialsecurity benefits andall staff have beencovered

contribution andbenefitrequirements areidentical to publicschemes

sponsoring firm mandatory foremployees andemployers

contributions and benefitsare tax free up to certainlimits

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b) supplementaryoccupational schemesfirms can alsoestablishsupplementaryschemes asfoundationsestablished accordingto Civil Law

contributions fromemployer andemployee

sponsoring firm voluntary foremployees andemployers


personalschemes

a) life insurancepolicies10-year-with-profitendowment policiesbenefits can either bedrawn out as lumpsum or annuity

b) individualretirement policies*

benefits can either bedrawn out as lumpsum or annuity

DC plan

life insurance companies

pension companies

voluntary

voluntary



* a proposal has been submitted to the Parliament for the enactment of Individual Retirement System

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liquidityFunding and risk


UnitedKingdom

Basic StateRetirementPension

Age retirement is 65 formen and 60 for women.From 2010, women’spension age will begradually increased to 65by 2020.A flat rate benefit applies.Benefit is related to yearsof contribution with aminimum number.

Pay-as-you-go-basis Administered by theState

Compulsory foremployees and self-employed with earningsabove a specifiedthreshold.

Employers’ contributions(i.e. their NationalInsurance contributions,which are paid under theState contributory socialsecurity scheme, andwhich help to fund theBasic State RetirementPension) are deductiblein full from taxableprofits as businessexpenses.Employees contributionsare deductible from pre-taxable incomeBenefits are taxed asincome

SERPS Age retirement is 65 formen and 60 for women.

Pay-as-you-go-basis.

Earnings-relatedbenefit throughoutworking life betweenlower and upperlimits of NationalInsurancecontributions.

Administered by theState.

Contracting-out ispossible throughmembership of anoccupational pensionscheme or a personalpension scheme.

Employers’ contributionsare deductible in fullfrom taxable profits asbusiness expenses.

Contracted-out schemes,i.e. schemeswheremembers havechosen tohave theirSERPS rights

Note: The retirement agesshown below apply onlyto the contracted-outrights held in the scheme.

Age retirement is 65 formen and 60 for women.

Employees leaving a firm

Funded. DB or DC

For DC schemes,there is minimummandatoryannuitisation: moneypurchase funds mustbe used to buy anannuity (i.e. to put

Administered by:- trustees via a closedpension fund- life insurancecompany.

Closed pension fundmay be externallymanaged by

Employer: if contract-outof SERPS must set uppension plan.

Employee: Voluntary,but if opt-out must thensign up with anappropriate personalpension plan or purchase

Until April 2001, thepensions tax limits arecontribution-based forpersonal schemes (i.e.allowable contributionslimited to a proportion ofwages, at a rate thatvaries with age) andmainly benefit-based for

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includedwithin theirprivatescheme.

can opt to defer benefits.Otherwise, they musteither transfer the balanceto their new employer’splan, to a personalpension plan, or must beused to purchase adeferred annuity.

Lump-sums notpermitted.

Contracted-out rights aresubject to a degree ofmandatory priceindexation.

pension intopayment) by the ageof 75. Note: In fact,all tax-approvedpension schemesmust be used toprovide pension,except for the tax-free lump sum.

insurance companies,banks, buildingsocieties, friendlysocieties, unit trusts,and actuarial firms.

Occupational pensionschemes are set upunder trust law.

The CompensationBoard operates acompensationscheme whichapplies in cases offraud. Each pensionscheme mustparticipate andclaims are met by alevy on all otherschemes.

a deferred annuity.

Specific requirement forcontracting- out:- Reference Scheme test:plan must be certified bythe plan actuaryproviding at least 1/80 ofcovered earningsaveraged over 3 years,for each year ofemployment.- Protected Rights; rebateof national contributions( protected rights) forboth employer andemployee built up underthe plan must be used tobuy an annuity on aunisex basis.

occupational schemes(i.e. benefits limited byreference to final/averagesalary or the earningscap, although there isadditionally a maximumcontribution level of 15%of earnings for theemployee). From April2001, DC occupationalschemes may move overto the tax regime forpersonal schemes.


Benefits paid in the formof annuities are taxed asincome. (Note: this is infact the case with alltypes of pensionbenefits).

The maximum lump-sumwhich can be taken isgenerally 1.5 times(capped) salary in a DBscheme or 25% of thefund in a DC plan. Suchlump sums are tax-free.

Contracted-inschemes, i.e.schemeswheremembers have

Scheme rules will laydown the normalretirement age formembers, within InlandRevenue (IR) parameters.

Funded. DB or DCare possible

Employers may setup non-tax approved

Administered by:- trustees via a closedpension fund- life insurancecompany.

Voluntary basis Final benefit payablefrom occupationalschemes is currentlylimited by the tax rules.The maximum benefit

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chosen tohave theirSERPS rightstreatedseparatelyfrom theirprivatescheme (theschemebenefits arepaid inaddition toSERPS).

People may retire earlierthan the normalretirement age undervarious circumstances. IRrules mean that this is notnormally allowable,however, before the ageof 50, except in specialoccupations or in cases ofill health early retirement.

Employees leaving a firmcan opt to defer benefits.Otherwise, they musteither transfer the balanceto their new employer’splan, to a personalpension plan, or must beused to purchase adeferred annuity.

The prohibition on theprovision of lump-sumsthat applies in the case ofthe contracted-outelements does not applyto contracted-in schemes,i.e. lump-sums arepermitted.

(and non-taxpriviledged)arrangements, whichmay be unfunded, toprovide executiveswith extra retirementprovision on earningsabove the earningscap.

Closed pension fundmay be externallymanaged byinsurance companies,banks, buildingsocieties, friendlysocieties, unit trusts,and actuarial firms.

Occupational pensionschemes are set upunder trust law.

The CompensationBoard operates acompensationscheme whichapplies in cases offraud. Each pensionscheme mustparticipate andclaims are met by alevy on all otherschemes.

payable is two-thirds offinal salary. In addition,there is a limit onemployees' contributionsof 15% of earnings.Salary that can be takeninto account for thepurposes of assessingthese limits is capped atGBP 91,800. From April2001 DC occupationalschemes may move overto the personal pensionrules. These rules limittotal contributions to amaximum of 17.5% ofearnings, increasing withage. There is no benefitlimit.


Benefits paid in the formof annuities are taxed asincome.(Note: this is in fact thecase with all types ofpension benefits).

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UnitedStates

Social securitysystem

Plan run on a PAYG-basiswith reserve funds

Managed by a governmentalentity (social security trust)

Employers:mandatorycontributionsEmployees:mandatorycontributions

Occupationaldefined benefitand hybridplans

Minimum retirement agevaries, full lump-sumpossible.

Benefits can only beretrieved on cessation ofemployment withemployer and then aresubject to a 10% penaltytax.

Funded. DB or hybridplans.

Plans offer some form offinancial or/and biometricguarantees.

Administered by:- sponsor, but assets managed ina closed pension fund (trustform) by trustees,- life insurance companies.Closed pension funds may beexternally managed.All DB plans funded via aclosed pension fund must beinsured through the PBGC, agovernment entity.

Plans arevoluntary

Employer contributions aretax-deductible up to 15% ofearnings. Employeecontributions are not taxdeductible.


Benefits are taxed as income.

Occupationaldefinedcontributionplans

The accumulated balancecan be commuted at anytime before retirementsubject to a 10% taxpenalty,

Fully-Funded. DC only.

Plans offer no guarantees

Plans may be administered by:- sponsor, but assets managed ina closed pension fund (trustform) by trustees,- collective investment schemesproviders (401(k)).

Closed pension funds may beexternally managed.

Voluntary foremployers andsalariedemployees.

Employer contributions aretax-deductible up to 15% ofearnings. Employeecontributions are taxdeductible.


Benefits are taxed as income.Individualretirementaccounts(IRA)

The accumulated balancecan be commuted at anytime before retirementsubject to a 10% taxpenalty.

Plans are fully funded, DBor DC.IRAs invested in mutualfunds or bank depositsoffer no guarantees. IRAsinvested in annuities offertheir guarantees.

Administered either by acollective investment schemeprovider, a bank, or aninsurance company (annuity).

Voluntary foremployers, andall employees(including theself-employed).



Individualannuities

The accumulated balancecannot be commuted atany time before theretirement age stipulatedin the contract.

Funded. DB.

They offer different typesof guarantees

Administered by life insurancecompanies.

Voluntary foremployers,employees, andthe self-employed.



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