G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional InvestorsReturn

The paper deals with the so-called small pension reform in the Czech Republic in response to the findings of the Constitutional Court Pl. US 8/07. Through microeconomic modelling of the situation with the help of valid retro data, the development of solidarity and equivalence in the ongoing pension system is analysed in detail, both before and after the so-called small pension reform of basic pension benefits carried out from 2005-2016 in the Czech Republic. The analytical calculations are focused on properly calculating retirement in accordance with Act No. 155/1995 Coll. on pension insurance, as amended, from the perspective of different situations of typified individuals with different incomes (five) and their individual replacement ratio from the perspective of the Czech pension system, which is funded on an ongoing basis. The results quantify the individual replacement rates and are analysed from the perspective of model situations where, despite the enactment of these small pension reform, a high individual replacement ratio still remains for low-income individuals compared with high-income individuals. The analysis shows that the lower the pre-retirement income is, the higher the individual pension benefit itself is in comparison with pre-retirement higher income, and the more it manifests itself in a higher rate of solidarity with the higher individual replacement ratio. Conversely, with an increase in the pre-retirement pension, the benefit income rises, but increases more slowly in relation to the pre-retirement income and the individual replacement ratio decreases significantly. Low-income individuals have a tendency to increase the nationwide replacement rate, while high-income individuals tend to reduce it. In conclusion, the paper also points out the difficulty of achieving ongoing financial sustainability of the pension system in the Czech Republic, where a considerable increase in the so-called awaited dependency ratio (per 100 people) is expected from the 2015 value of 26.6 to 47.8 in 2080 (ceteris paribus).

The article analyzes the possible impacts of the fully-funded (FF) pension system (the so-called Chilean model), which was introduced in the Czech Republic in 2012, on future pensions of contributors to the system and on state expenditures related to the pension system reform. The author performed calculations for 3 model examples of individuals who would participate solely in the FF and also of individuals who would contribute to both the pay-as-you-go (PAYG) and the FF during their lives. The calculations in all model examples were made for 4 average real annual interest rates and for 4 standardised income levels. The income replacement rates of the examined individuals were compared with the existing PAYG and with a hypothetical balanced PAYG. The aim was to determine the minimum rate of the pension funds' appreciation from whichthe transition to the FF would be profi table for all examined individuals. The article also attempts to identify the duration of the transition period, the moment after which the FF would become budget-neutral, and the approximate cost of the transition process.

General elections in Chile in the autumn of 2013 have unleashed a discussion about the shortcomings of the Chilean pension system and the necessary changes. Radical solutions contains various forms of return of the PAYG system. The paper deals with the preparation and the main implication of the pension reform in 1981 which led to the transition from the PAYG system to the capital system. Thanks to the reconstruction of the time series from the 70s and 80s of the 20th century using the latest data from 2013 and own calculations the article confirmed that the transition meant a noticeable increase in pensions for everybody included in the system. This outcome is driven mainly by the lower tax burden, generated savings and positive impact, particularly on the country's GDP and government budget. The paper also summarize the available knowledge about the pension reform in Chile in the Czech language.

The presented article can be divided in three main parts. In the first one the authors define the term hedge fund and discuss briefly the history of these investment entities and their current position on the global financial markets. The second part of the article investigates the impact of hedge fund activities on stock markets. The findings of this analysis which is based on descriptive statistics and distribution of the yields of a hedge fund index and two representative stock market indices and the lagged correlation between them don't indicate that hedge funds have the potential to contribute in a significant way to the instability of stock markets. The third and final part of the article deals with the regulation of hedge funds. While the regulation of these investment vehicles before the 2007-2008 global financial crisis was rather light, significant changes were adopted as part of the regulatory response and overhaul of the financial markets. The Dodd-Frank Act in the US implemented among others new registration requirements for hedge funds and their advisors and imposed wide ranging information and record-keeping requirements on their activities.

Aging population and fiscal costs of the pension system is a burden for the sustainability of public finance. Therefore, many countries have been forced to reform their pension systems. One of the many ways of doing this is to switch from the convention pay-as-you-go system to capital funding. This paper explores the present Slovakia's Pension system and its impact on public finance from the long-term perspective. This article points out that the authorities have to be committed to bringing public finance to a sustainable path. In this regard, a financial consolidation of the pension system would be needed. Therefore, the paper suggests some alternatives of the mixed pension system.

The paper deals with a wide-spread myth that a switch from a PAYG to a funded pension system might solve adverse consequences of the population aging. It is shown, that under additional assumptions the pension debt (which is created during the process of the switch) is exactly equal to the value of assets that the pension funds accumulate. These additional assumptions are following: government imposes additional taxes, which are equal to the difference between the contributions to the former PAYG system and the contributions to the pension funds. Therefore workers contribute less to the pension funds but if the additional taxes are taken into account, they continue paying the same amount. It is shown, that if the additional taxes were permanently lower than what is supposed, the pension debt would grow beyond any limits. The other additional assumption made is that the interest rate paid by government from its pension debt is the same as the interest rate reached by the funds. If this assumption is relaxed, the qualitative conclusions do not change. Hence, demographic development cannot be used as an argument in favour of a switch of the pension system.

The Czech Republic is going to face ageing of its population. It will affect the economy in many ways. The pension system is one of them. This paper provides a view on possibilities how to insure long-term stability of the pension system in the Czech Republic using a mix of pay-as-you-go and fully funded system. Simulations are based on OLG model, long-term demographic forecast and limits of fiscal policy stemming from the necessity to fulfill Maastricht criteria and The Stability and Growth Pact. Those obligations creates a frontier for plausible solutions. Results suggest that it is possible to find a solution for mixed system providing more favorable conditions than purely parametric changes of PAYG. Taking into account fiscal limits, the contribution rate to the FF pillar would be similar to the rates in other CEE countries where pension reform already started.

This essay focuses on the pension system and highlights some of its key elements. The first part deals with the economic principles connected with the social security system. Eatwell's model is utilized to give some basic intuition of terms and concepts used in the pension reform discussion. The second part classifies pension systems from different perspectives and discusses some of the factors relevant for the Czech reform effort. The last part brings the main arguments of the pay-as-you-go supporters that seem to be missing in the current Czech debate. The aim of the authors is to show that a pension reform is a rather complex problem where no fast, simple and impartial view solutions exist. Rather than giving any particular recommendations, the authors try to stimulate the current pension reform debate by stating some controversial issues.