The past decade has brought broad recognition of the importance of pension systems to the economic stability of nations and the security of their aging populations. For the past 10 years, the World Bank has taken a leading role in addressing this challenge through its support for pension reforms around the world.

International experience shows that there is no uniform model for pension reform. There are, however, clear principles that can provide useful guidance to policy makers as they develop appropriate solutions based on a country's culture, political system, economy, and labor force structure. The World Bank's general framework for pension reform urges policy makers to start with the following three steps:

• Environment. Assessment of the macroeconomic, social, and demographic environment (initial conditions and capacities)

• Design. Establishment of policy intervention objectives, selection and evaluation of the reform design architecture, and establishment of the parameters of the scheme using actuarial modeling and analysis

• Performance. Evaluation of the system(s) using generally accepted principles of pension design or reform developed from international best practices

These principles include the most relevant ones: accessibility (coverage), adequacy, and sustainability. Other principles are affordability, fairness, predictability, robustness, economic, and administrative efficiency. These principles are intended to help policy makers rule out bad policy choices, thereby freeing them to design pension systems that are consistent with international best practices while still having considerable latitude to craft solutions that are appropriate for their country's social preferences and country-specific conditions.

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