The experience of Central and Eastern Europe (CEE) with pension reform can illuminate some of the pitfalls of embracing systemic reforms too eagerly. Subsequent reversal of these reforms occurred some years later as governments found themselves increasingly under financial strain.
As the largest economy in CEE, the case of Poland provides a good example. In 1999, Poland enacted “public-to-private” systemic pension reforms of the then-existing pay-as-you-go (PAYG) state system. The reforms introduced private pensions and diverted a significant share of workers’ contributions away from public pensions towards these private plans.
In a dramatic move in 2014, however, the Polish government then reversed these changes, with “private-to-public” reforms that saw the government transfer the equivalent of USD 40 billion at present exchange rates of bond assets that had been accumulated within the nascent private pension system to the public system. In 2016, the government announced a further reversal of the previous system.
To learn more about pension reforms in Central and Eastern Europe, read Dominic Clark’s article here.
A Milliman client, a global information technology (IT) company, acquired an operation in Spain. Along with the acquisition came the operation’s local retirement program, with its associated assets and liabilities, including a defined benefit (DB) pension obligation.
As part of the acquisition process, an actuary—appointed by the seller—carried out an actuarial valuation of the existing local retirement liability. Not long after the acquisition, the company asked Milliman to carry out the actuarial valuations for accounting purposes, covering operations in several countries.
To read more about the work Milliman did—and to learn why expert international actuarial advice is so important for successful global M&A deals—see Dominic Clark’s article here.
In Italy, some pensions are obligated to offer a capital guaranteed subfund to plan participants. While many participants see guaranteed subfunds as safe options, the investment may not meet their long-term retirement objectives. In this article, Milliman’s Dominic Clark highlights asset-liability management (ALM) analyses that were conducted for a large institutional Italian pension fund. The client’s main aims were twofold:
• To better understand the fit between asset allocation and expected future liabilities given the constraint of having to respect the capital guarantee of the guaranteed subfund.
• To better inform participants regarding the likely evolution of their account balances, and in particular, provide fund-specific projections that can help guide members in their choice of future contribution levels.