Editing Pension (section)

==Pillars==
Most national pension systems are based on multi-pillar schemes to ensure greater flexibility and financial security to the old in contrast to reliance on one single system. In general, there are three main functions of pension systems: saving, redistribution and insurance functions. According to the report by the World Bank titled "Averting the Old Age Crisis", countries should consider separating the saving and redistributive functions, when creating pension systems, and placing them under different financing and managerial arrangements into three main pillars.

'''The Pillars of Old Age Income Security:'''<ref>{{cite report |publisher=Oxford University Press |year=1994 |title=Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth |series=A World Bank Policy Research Report |place=New York |isbn=0-19-520996-6 |issn=1020-0851 |url=http://documents.worldbank.org/curated/en/973571468174557899/pdf/multi-page.pdf}}</ref>
{|class="wikitable" style="text-align:left"
|-
! Properties 
! Mandatory publicly managed pillar 
! Mandatory privately managed pillar 
! Voluntary pillar
|-
| Financing 
| Tax-financed 
| Regulated fully funded 
| Fully funded
|-
| Form 
| [[Means test]]ed, minimum pension guarantee, or flat 
| Personal savings plan or occupational plan 
| Personal savings plan or occupational plan
|-
| Objectives 
| Redistributive plus coinsurance 
| Savings plus coinsurance 
| Savings plus coinsurance
|}

However, this typology is rather a prescriptive than a descriptive one and most specialists usually allocate all public programmes to the first pillar, including earnings-related public schemes, which does not fit the original definition of the first pillar.<ref name="auto6">{{cite book |author=OECD |year=2006 |chapter=Pension-system Typology |title=OECD Pensions at a Glance 2005: Public Policies across OECD Countries |pages=21–25 |publisher=OECD Publishing |place=Paris |doi=10.1787/pension_glance-2005-3-en|isbn=9789264018716 }}</ref>

===Zero pillar===
This non-contributory pillar was introduced only recently, aiming to alleviate poverty among the elderly, and permitting fiscal conditions. It is usually financed by the state and is in form of basic pension schemes or social assistance.<ref name="auto">Terziev, Venelin. (2019). Historical development and characteristics of pension systems. 5. 124-135.</ref><ref name="auto2">Holzmann, R., Hinz, R., von Gersdorff, H., Gill, I., Impavido, G., Musalem, A. R., … Subbarao, K. (2005). Old-Age Income Support in the 21st Century: An International Perspective on Pension Systems and Reform (pp. 10–10). N.W. Washington, DC, USA: The International Bank for Reconstruction and Development / THE WORLD BANK. Retrieved from http://siteresources.worldbank.org/INTPENSIONS/Resources/Old_Age_Inc_Supp_Full_En.pdf</ref> In some typologies, the zero and the first pillar overlap.<ref name="auto6"/>

===First pillar===
Pillar 1, sometimes referred to as ''the public pillar'' or ''first-tier'', answers the aim to prevent the poverty of the elderly, provide some absolute, minimum income based on solidarity and replace some portion of lifetime pre-retirement income. It is financed on a redistributive principle without constructing large reserves and takes the form of mandatory contributions linked to earnings such as minimum pensions within earnings-related plans, or separate targeted programs for retirement income. These are provided by the public sector and can be [[PAYGO|pay-as-you-go]] financed.

===Second pillar===
Pillar 2, or ''the second tier,'' built on the basis of defined benefit and defined contribution plans with independent investment management, aims to protect the elderly from relative poverty and provides benefits supplementary to the income from the first pillar to contributors.<ref name="auto"/> Therefore, the second pillar fulfils the insurance function. In addition to DB's and DC's, other types of pension schemes of the second pillar are ''the contingent accounts'', known also as [[Notional Defined Contributions]] (implemented for example in Italy, Latvia, Poland and Sweden) or ''occupational pension schemes'' (applied, for instance, in Estonia, Germany and Norway).<ref name="auto"/>

===Third pillar===
The third tier consists of voluntary contributions in various different forms, including occupational or private saving plans, and products for individuals.

===Fourth Pillar===
The fourth pillar is usually excluded from classifications since it does not usually have a legal basis and consists of "informal support (such as family), other formal social programs (such as health care or housing), and other individual assets (such as home ownership and reverse mortgages)."<ref name="auto2"/><ref>{{Cite web|url=http://siteresources.worldbank.org/INTPENSIONS/Resources/395443-1121194657824/PRPNoteConcept_Sept2008.pdf |archive-url=https://web.archive.org/web/20130612091305/http://siteresources.worldbank.org/INTPENSIONS/Resources/395443-1121194657824/PRPNoteConcept_Sept2008.pdf |archive-date=2013-06-12 |url-status=live|title = Welcome to World Bank Intranet}}</ref>

These five pillars and their main criteria are summarised in the table below by Holzmann and Hinz.

'''Multipillar Pension Taxonomy:''' <ref name="auto2"/>
{|class="wikitable" style="text-align:left"
|-
! Pillar 
! Objectives
! Characteristics 
! Participation
|-
| 0
| Elderly poverty protection
| [[Social pension]], universal or means-tested
| Universal or residual
|-
| 1
| Elderly poverty protection and consumption smoothing
| Public pension plan, publicly managed, defined benefit or notional defined contribution
| Mandated
|-
| 2
| Consumption smoothing and elderly poverty protection through minimum pension
| Occupational or personal pension plans, fully funded defined benefit or fully funded defined contribution
| Mandated
|-
| 3
| Consumption smoothing
| Occupational or personal pension plans, partially or fully funded defined benefit or funded defined contribution
| Voluntary
|-
| 4
| Elderly poverty protection and consumption smoothing
| Access to informal (e.g. family support), other formal social programs (e.g. health) and other individual financial and nonfinancial assets (e.g. homeownership)
| Voluntary
|}