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Non Adapting System Case Study

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Non-adapting System Balaba mentioned in her 2007 comparative study on international pension systems that the best practices of an effective pension fund system should be centered around attributes of good governance, transparency, social responsibility, and accountability. Among these characteristics, accountability, which is about ensuring that the governance structures are effective by creating compatible incentives that are also responsive to the needs of the pensioned individuals (Charlton, Roger and McKinnon, Roddy, 2011), justifies that the current pension scheme’s non-adaptability to the current needs is truly a major problem. Various sources have proven that the current pension system does not adapt to the dynamic economic state which is affected by factors such as cost of living and inflation of commodity prices. For one, a study on intergenerational equity in our country by Rydell in 2005 identified the need for a just treatment for successive cohorts such as by ensuring that tomorrow’s retirees get pensions that are adaptive to the current cost of living. This means that the system of giving benefits …show more content…

This has major impact on sustainability of current pension plans in the country. The more elderly people there are, the more pension plans to support. Based on the projected values estimated by United Nations Population Division, as quoted by Park (2012) in an ADB report, the ratio of the elderly (60 and above) to the active labor force (15-59 years old) is gradually increasing. This means that the labor force carries a gradually increasing burden brought about by the elderly. In line with this, there is a gradually increasing imbalance between contributions and benefits for the pension funds. Thus, if this projected trend remains unresolved, the whole system may collapse as there will come a time where benefits and spendings will outweigh the

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