Effects of population ageing on the pension system in Belarus

Abstract

Belarus currently has a relatively generous pay-as-you-go pension system, but population aging coupled with recent problems with economic growth will soon make it unsustainable. We build a rich overlapping generation model of Belarusian economy, which shows that without reform the Pension Fund will run into persistent and growing deficit, which will reach 9% of GDP by 2055. We also compute the fiscal projections of several parametric pension reforms, including the reform which will start in 2017. To avoid a deficit without reform, pension benefits would have to be substantially reduced. The increase of retirement age to 65 for both genders has a strong positive effect on sustainability of the pension system and keeps the deficit below 2% of GDP

Poverty and Shared Prosperity in Belarus over the Past DecadeTrends, Drivers, and Challenges

“…This was due to low birth rates and survival rates for the 1940-1946 cohorts, resulting in low numbers of pensioners in recent years (Zviniene and Biletsky, 2011). While similar in size to other European countries (total pensions in Belarus were about 9 percent of GDP in 2013), a couple of characteristics are notable, including: (i) very low retirement ages (60 for men and 55 for women); (ii) very high contribution rates --total pension contributions are 29 percent of gross wages, of which 1 percent is paid by the employee and the rest is covered by the employer (Lisenkova and Bornukova, 2015).…”

“…The share of 60+ population in Belarus is projected to increase from 15 percent in 2000 to 35 percent in 2050, while the old age dependency ratio is projected to increase from 20 percent in 2000 to 46 percent in 2050. As the result of the shrinking working age population, and the increase in the share of elderly in Belarus, the projected fiscal flows in the pensions system in Belarus are projected to deteriorate, and the pension fund deficit could reach an equivalent of 9 percent of GDP by 2050 (Bornukova et al, 2015). The share of pension recipients both in the B40 population and in the T60 population increased between 2003 and 2015, and will continue increasing in the future, such future pension dynamics will play an increasingly important role in overall disposable income growth.…”

“…This is not sustainable, however. Recent simulations (Bornukova et al, 2015) suggest that the ratio of pensions expenditures to GDP could increase from 9 percent in 2013 to 20 percent by 2050. The cumulative effect of the increasing number of beneficiaries (pensioners) and the falling payments into the pension fund, could result in a pension fund deficit equivalent to 9 percent of GDP by 2050 (Bornukova et al, 2015).…”

Assessment of the Financial Sustainability of China’s New Rural Pension Plan: Does the Demographic Policy Reform Matter?

“…A growing body of literature has studied the impacts of these reforms on pension sustainability. For instance, by building a rich overlapping generation model, Lisenkova and Bornukova investigated Belarus' 2017 retirement reform [25]. They concluded that decreasing the pension replacement rate from 43% in 2013 to 28% in 2050 would help to keep the pension deficit below 3% of GDP in 2050, and the pension deficit would almost disappear in 2100.…”

The Countermeasures Assessment Towards Retirement Basic Savings Estimation Through the Mathematical Research

“…This trend is due to retirement by baby boomers which affects towards the increment of elderly share population of the countries [4]. Consequently, the ageing population has the impacts on future productivity as well as economic growth of the country [5], [6].…”