In many policy areas it is essential to use the best estimates of life expectancy, but it is vital to most areas of pension policy. This paper presents the conceptual differences between static period and dynamic cohort mortality tables, estimates the differences in life expectancy for Portugal and Spain, and compares official estimates of both life expectancy estimates for Australia, the United Kingdom, and the United States for 1981, 2010, and 2060. These comparisons reveal major differences between period and cohort life expectancy in and between countries and across years. The implications of using wrong estimates for pension policy, including financial sustainability, are explored.

The paper provides a framework for the conceptualization, definition and measurement of the legacy costs that needs to be addressed in a reform that transforms an unfunded (or non-financial) defined benefit (NDB) scheme into an equally unfunded notional (or non-financial) defined contribution (NDC) scheme. During a transition from NDB to NDC a financing gap typically arises due to accrued to date liabilities from the old system in excess of the NDC scheme's sustainable flow of benefits. This gap – or legacy cost – needs to be estimated and best explicitly financed. We illustrate different techniques to gauge the scope of the cost. The paper applies the proposed approach to a hypothetical NDC reform in China.

The reforms initiated in Central and Eastern European countries imply dramatic changes at social, economic and political level. The transition from a centrally planned to a market–based economic system requires profound reformation of all economic and social institutions, amongst them, in prominent place, the way social benefits are provided and financed. Social programs in these countries are challenged from two sides: Firstly, they have to provide a social safety net for the most vulnerable in society during economic transition in order to support the reform program in social and political terms; secondly, social programs have to be restructured in order to be financially sound, socially equitable and economically efficient in a more (or fully) market-oriented environment.

Concerns about reforming public pensions schemes are an OECD-wide phenomenon. This paper highlights in a first part the background and various causes of the reform debate, summarized in five broad areas: budgetary, economic, social, population aging, and system maturation. The second part presents major directions of current reform approaches of public pension schemes. Despite the different structure and history of these schemes, the major trends in reform are strikingly similar. The final part discusses some major policy considerations resulting from the current reform approach in the face of an aging population. At present, the pace of the reform process in most countries must be considered insufficient to put the pension systems on a financially sound basis and thus to avoid future individual welfare losses and intergenerational income distribution.

All countries in Central and Eastern Europe require rapid and drastic restructuring of their public pension schemes for macro- and microeconomic reasons. While initial considerations were geared towards streamlining the unfunded scheme, reducing many distortions and making it financially sound, some transition economies initiated reform plans for a move from unfunded to funded retirement income provision. The paper reviews the need for reform and surveys the discussion and current plans before addressing three central open questions: How to structure the first and unfunded tier? How to finance the transition toward the second and funded tier? What are the minimum financial sector requirements before funded provisions can be initiated? The success of the current pension reform efforts in Central Europe will have an important bearing on developments throughout Europe. A failure in one transition economy caused by bad design, unprojected deficits, or insufficient financial market preparation could discredit a funded pension system in the whole region; a successful move towards an unfunded-funded multi-tier pension scheme in Eastern Europe could positively stimulate the discussion of pension reform in the European Union.

The transition from plan to market-driven economies of Central, Eastern and Southern Europe implied a major shift in their trade orientation. While before reform almost all trade took place within CMEA, in the mid-1990s trade relations are dominated by the OECD countries. This rapid change raises two questions: To what extent is the trade adjustment already accomplished? In case of a negative response, what factors account for observed differences in speed and pattern of this process among countries? From a comparison between actual and estimated potential trade flows in each year for 1988 to 1995, the econometric results suggest that the trade adjustment is far from being completed. Significant differences between countries can be explained by differences in the scope and speed of economic reform (such as liberalisation and macroeconomic stabilisation), differences in transactions costs (such as proximity to the West and previous market presence), and by differences in the demand and supply structure (such as economies of scale and differentiated trade structure). The results suggest a head-start for determined, sophisticated and proximate transition economies.