Your SlideShare is downloading. ×
  • Like
Pensions Core Course 2013: Introduction to PROST
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.


Now you can save presentations on your phone or tablet

Available for both IPhone and Android

Text the download link to your phone

Standard text messaging rates apply


Published in Business , Technology
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads


Total Views
On SlideShare
From Embeds
Number of Embeds



Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

    No notes for slide


  • 1. P R O S T – Pension Reform OptionsSimulation ToolkitTatyana Bogomolova,World Bank, HDNSP1
  • 2. What is PROST?• PROST – computer-based toolkit to simulatepension systems over time• Created to support World Bank pension work• Developed in EXCEL, programmed in VisualBasic• User-friendly, input-output in Excel• Regular updates with new features2
  • 3. Designed to:• Estimate future trends of the pension systemover a long time frame (coverage,contributions, benefits, financial flows)• Test robustness of the system to shocks (e.g.demographic, economic)• Evaluate and compare reform options topromote informed policymaking3
  • 4. Key Features of PROST• Formulas are separated from data and assumptions,no hidden/imposed assumptions• Models single year cohorts, tracks them down overtime; income dimension• Ensures consistency of assumptions about changes inthe number of contributors, pensioners andcontribution density• Allows to model “dormant” contributors (importantin countries with low contribution density)4
  • 5. Key Features of PROST (cont.)• Outputs intermediate results• Allows to look at pension system as a whole as wellas at individuals• Addresses all key policy dimensions• Capacity to model national, closed-group, multiple(fragmented) schemes• Generic, flexible, easily adapted to various countrycircumstances• Modeling reforms is relatively fast and easy5
  • 6. Input Data and Assumptions• Demography– Population– Fertility– Mortality– Migration• Economy– Macroeconomy– Labor market• Pension system– Pension system data (initial status)– Pension policy– Behavior of pension system members6
  • 7. 7PopulationContributors PensionersPS revenues PS expendituresEconomyAnnual current balanceImplicit Pension Debt- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -IndividualsGeneral Calculation Scheme- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Pensionsystem
  • 8. PROST Output• Demographic projections– Population– Life expectancy– Population dependency ratios• Pension system demographics– Number of contributors– Number of pensioners (by pensioner category)– System dependency rate– Coverage rate• Pension system finances (PAYG DB, multipillar)– Wages, benefits– Pension system revenues, expenditures, current balance, assets/debt– Implicit pension debt• Output for individuals (contributions, benefits, NPV, IRR)8
  • 9. Analysis of PAYG DB Systemswith PROST• Financial sustainability of PAYG systems (financialflows, IPD, financing gap)• Adequacy of expected benefits (at retirement, post-retirement, by pensioner category)• Distributional effects and equity issues• Evaluation of reform options9
  • 10. Assessment of Pension Reform Optionswith PROST• Types of pension reform PAYG “parametric” reforms (changing contribution rates,retirement age, benefit formula, indexation, etc.) Systemic reforms (fully funded DC, notional DC schemes,any combination of PAYG DB, FF DC and NDC)• Different transition paths Switching pattern Accrued rights• Can now model on-going DC schemes10
  • 11. PROST Modeling Experience• Used in 90+ WB client countries• ECB used PROST to model a number of countries(2009)• WB study on the impact of the financial crisis ondifferent types of pension systems (2009-2010)• WB study on the implicit pension debt (2004-2005)• Testing of PROST: comparing projections with theILO model, some actuarial models (Jordan, India,Tanzania)11