Automatic Balance Mechanisms as instruments of maintaining pension scheme financial sustainability
Automatic Balance Mechanisms as instruments of maintaining pension scheme financial sustainability

Summary/Abstract: Considering the challenges of modern pension schemes following the European Commission [2003] one can point out the three main fields which require particular attention: 1) adequacy; 2) financial sustainability and efficiency; 3) ability to respond to the changing needs of societies. This paper focuses mainly on the second of these issues – financial sustainability. Although this issue has been broadly discussed by academics, only a small number of studies takes up the topic of developing automatic mechanisms, independent from political decisions, which would be able to guarantee the long-term financial sustainability of pension schemes. Having noticed this research gap, the article poses the question whether automatic balance mechanisms (ABMs) are suitable instruments of ensuring the sustainability of pension schemes. This question was the basis for the formulation of the main aims of this paper which are: 1) to introduce the issue of pension systems sustainability and to discuss possible policies and instruments that may be used to restore it; 2) to present, based on existing literature, automatic balance mechanisms that have already been applied in some countries; 3) to propose an appropriate framework of assessing the automatic mechanisms. Moreover, having treated this article as a preliminary study, another goal is to provide suggestions for further research in the area automatic mechanisms.

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