GLOBAL - Fundamental pension reforms have been far more extensive in Asia and Central and Eastern Europe (CEE) than those in western industrialised countries, research shows.
Allianz Global Investors latest report revealed both Asia and CEE regions had followed the World Bank model of a strongly funded pension pillar that took the form of defined contribution (DC) - mandatory in most countries.
The asset management firm found the key drivers of the pension reforms included Asian aspiration to establish formal pension systems to replace traditional family-based support systems, and a concern around the lack of sustainability of previous CEE pension systems.
It said another powerful driver of the reforms was demography, as demographic developments in emerging markets were "severe" and more "dramatic" than in the US and often surpassed Western Europe.
Both continents also wanted to ensure the sustainable success of DC plans and adequate living standards after retirement and said financial institutions plan sponsors needed to improve financial education.
The pension reforms mean the DC arrangements were likely to rapidly build up a massive amount of pension assets - €244.9bn (US$313bn) in CEE and €1,049.3bn in Asia by 2015.
Allianz Global Investors senior pensions analyst Alexander Boersch said: "The emerging economies have initiated far reaching pension reforms that show a great deal of similarity.
"Obviously, significant economic, political and cultural differences exist between the emerging economies in the two regions, nevertheless they have followed a similar path of reforms - and one that differs considerably from that taken in the western industrialised world."
Boersch explained that by introducing a strong funded pillar, emerging market governments followed a reform path that promised to generate sustainable pension systems for future generations.
He added: "Now that a solid foundation is in place, the fine-tuning of the system becomes the major task. It is of utmost importance that the DC systems function properly as, within a few years, the living standards of a significant and growing part of the population will depend on the capital they generate."
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