This document provides an overview of PROST, a computer-based toolkit created by the World Bank to simulate pension systems over time. PROST allows users to estimate future trends in a pension system, test the system's robustness to shocks, and evaluate and compare different reform options. Key features of PROST include its ability to model single year cohorts over time, ensure consistency of assumptions, output intermediate results, and model national and fragmented pension schemes. PROST uses input data on demography, the economy, and pension systems to produce outputs related to demographics, finances, and impacts on individuals. It has been used to model and assess pension reforms in over 90 World Bank client countries.

1. P R O S T – Pension Reform Options
Simulation Toolkit
Tatyana Bogomolova,
World Bank, HDNSP
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2. What is PROST?
• PROST – computer-based toolkit to simulate
pension systems over time
• Created to support World Bank pension work
• Developed in EXCEL, programmed in Visual
Basic
• User-friendly, input-output in Excel
• Regular updates with new features
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3. Designed to:
• Estimate future trends of the pension system
over 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 to
promote informed policymaking
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4. Key Features of PROST
• Formulas are separated from data and assumptions,
no hidden/imposed assumptions
• Models single year cohorts, tracks them down over
time; income dimension
• Ensures consistency of assumptions about changes in
the number of contributors, pensioners and
contribution density
• Allows to model “dormant” contributors (important
in countries with low contribution density)
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5. Key Features of PROST (cont.)
• Outputs intermediate results
• Allows to look at pension system as a whole as well
as at individuals
• Addresses all key policy dimensions
• Capacity to model national, closed-group, multiple
(fragmented) schemes
• Generic, flexible, easily adapted to various country
circumstances
• Modeling reforms is relatively fast and easy
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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 members
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7. 7
Population
Contributors Pensioners
PS revenues PS expenditures
Economy
Annual current balance
Implicit Pension Debt
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Individuals
General Calculation Scheme
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Pension
system

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)
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9. Analysis of PAYG DB Systems
with PROST
• Financial sustainability of PAYG systems (financial
flows, IPD, financing gap)
• Adequacy of expected benefits (at retirement, post-
retirement, by pensioner category)
• Distributional effects and equity issues
• Evaluation of reform options
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10. Assessment of Pension Reform Options
with 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 schemes
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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 on
different types of pension systems (2009-2010)
• WB study on the implicit pension debt (2004-2005)
• Testing of PROST: comparing projections with the
ILO model, some actuarial models (Jordan, India,
Tanzania)
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