Pension reform is an issue at the center of public debate in many countries around the world right now. Given the importance of its social and macroeconomic implications, it confronts the policy makers, practitioners, and academia with challenging questions.

The diverse reform needs of pension systems in aging societies -- that are furthermore stressed by the pressures of globalization -- require parallel reforms of labor and financial markets. Faced by an ever aging population, countries have to reform pension systems to promote longer working and labor markets to ensure that people can actually do so. At the same time the working population, including youth, should be motivated to start contributing to the pension scheme. Diversifying the great spectrum of risks in a multi-pillar pension scheme with mandated and/or voluntary pillars could be the answer that would also allow also more flexibility in individual retirement decisions. However, to do so on a major scale requires a well developed financial market.

Major challenges that will be addressed at the Forum:

Aging of population: How to convince people to work longer, how to make sure that they are healthy and continued to be educated? How to provide employers with incentives to keep or hire older people? How to assure that people will commit to lifelong learning? The fact of ever aging population is not an issue, but it creates many challenges and requests for changes and reforms in many areas.

For example, in order to stimulate people to work longer, the conditions have to allow them to be able to do so. At the same time, major changes in mentality are required as working longer can less and less assure that one is able to retire from one’s highest position held. Should this be handled by elderly by their changing positions within firms or by changing also the firms? What kind of system can provide the flexibility or mobility across sectors and countries on one hand and across education, work, and retirement on the other?

Young population: Young workers often prefer not to contribute to the pension system as they are not sure what will they receive out of the scheme when old. The system’s credibility is intimately related to the link of contributions and benefits, and the promise (in actuarial terms) that one will get out what one has paid in. This defined contribution approach has typically been structured through funded provisions but more recently has been introduced in a number of countries (Sweden, Latvia, Poland, and Italy). At the same time a number of additional countries are investigating this reform option (such as Hungary and Czech Republic). This unfunded individual account system (or NDC - non-financial defined contribution system) offers many promises to handle aging but also to help establish labor mobility across professions and countries.

Labor market: Labor market is becoming more and more flexible. This is happening because of newly introduced job market regulations on one hand or because of the natural evolution of the job market. New forms of being professionally active are being created and more and more people find them appealing. What was once in the domain of free spirited people has now expanded to several groups within labor force.

Current social security models do not always have adequate answers to the new reality on the labor market: Is the answer a simultaneous payment to more than one pension plan or splitting of the current pension plan to "more" and "less" mandatory pension plans? Is the answer in changing of a classical DB (defined benefit) system to NDC (non-financial defined contributions) and/or FDC (financial defined contributions) enough and what is the role of additional and complimentary forms of social security assurance for the old age, disability or death?

Financial markets: To compensate or to complement reduced public pension benefits requires longer work or higher individual savings for retirement. To make saving worthwhile for individuals, the net rates of return from retirement saving products have to be sufficiently high and with an acceptable risk profile. While countries in the region have made crucial efforts to prepare or implement funded pensions on mandatory or voluntary basis, the net returns achieved still have room for improvement. To accommodate a sustained retirement savings effort of larger scale will require further strengthening of financial market development, including new savings products and improved regulation and supervision.