| TA Name |
Strengthening the Pension System |
| Country |
Mongolia |
| TA Number |
4910 |
| Project Number |
40608-
01 |
| Fund Source/Amount[Closed] |
| Technical Assistance Special Fund |
US$150,000
|
| Gov't. of Luxembourg |
US$500,000
|
|
| Thematic Classification |
Economic growth
Social Development
Capacity Development
|
| Description |
The objective of the TA is to improve the access of households (including the poor) to long-term financial instruments by restructuring the pension system. The TA will review (i) the merits and shortcomings of the current pension system; (ii) the strategies to restructure the said system; (iii) the measures to expand its coverage; (iv) the investment policies and guidelines for the restructured pension fund with analysis of existing problems in the capital markets; and (v) the recommendations on necessary legal amendments to implement the restructuring strategies.
|
| Linkage to Country/Regional Strategy |
The TA will address the shortcomings indicated in the 2006-2008 Country Strategy and Program for Mongolia (i.e., the lack of appropriate financial instruments) by restructuring the pension fund and developing institutional investors and long-term financial instruments.
|
| Outcome |
Progress Toward Outcome |
|
Adoption by the Government of the proposed recommendations.
|
Strategy and investment policy and guidelines approved by the Government by March 2008.
Draft legal amendment submitted to Parliament by June 2008.
|
| Outputs and Timeframe |
Status of Implementation
Progress (Outputs, Activities and Issues) |
1. Recommendations on a strategy to further reform the pension system.
2. Investment policy and guidelines for restructured pension fund.
3. Draft legal amendments to implement the strategy.
4. Strengthened capacities of pension staff in collecting pension premiums, managing individual accounts, and investing accumulated fund.
|
1. A tripartite meeting among the Mongolian government, the international consulting firm and ADB was held 24 April 2008 to discuss the draft final report. The international consulting firm delivered the final report on 25 May 2008 after incorporating comments from the Mongolian government and ADB. The Consultants recommend to transform the Mongolian Pension System into a multi pillar system through the following reforms: (i) Introduction of a Universal Pension which is payable to each Mongolian citizen aged 60 and above, not mean tested and particularly benefiting vulnerable groups and self employed/herders. (ii) Eliminating the minimum payment and minimum membership features from the Current Scheme so that pensions are based solely on balances, while keeping participation mandatory for all formal employees. This would transform the Current Scheme into a solely defined contribution system. (iii) Creation of an additional pillar through a facility which takes irregular contributions as may come from the self employed/herders as voluntary savings (possibly subsized by the government). (iv) Transformation to a funded system of the Notional Defined Contribution system. In addition to structural reforms of the current pension system, the Consultants recommend 10 other reforms to strengthen the existing pension system. These include (i) correction of the (currently incorrect) account balances of the Current Scheme; (ii) facilitation of voluntary contributions to the Current Scheme; and (iii) removal incentives to underreport wages.
2. The Government expressed its intent to redirect incoming contributions away from the state budget into the newly created Pension Investment Fund. The value of the National Defined Contribution (NDC) accounts will also be transferred from the state budget to the new Fund. The Consultant recommended recognizing debt by having the assets in the Pension Investment Fund exchanged for Government Bonds, where investment management would be overseen by a Pension Investment Board. Given appropriate compliance and operational arrangements, a program of diversifying pension assets may follow, dependent on a great degree on the development of financial market and availability of suitable long term investments.
3. The legal expert commenced work on 15 Feb 2008. Final Report by legal expert was received on 26 Sep 2008.
4. In addtion to the on-site training for Mongolian government staff by the international consultants, two special training activities were organized, including one study tour to Toronto, Canada in May 2008.
5. At the request of the government, ADB agreed to extend the service of the international acturial expert by one month to do further study on pension debt. Due to the government changes after the election and the absence of an agreement among ministries/agencies on data requirements , the mission was cancelled.
6. The TA was closed on 31 December 2008.
|
|
| Responsible ADB Officer |
Yuebin Zhang
|
| Responsible ADB Department |
East Asia Department
|
| Responsible ADB Division |
|
| Executing Agencies |
Ministry of Finance
Mr. Kh. Ragchaa
Government Building-2 Negdsen Undestnii gudamj-5/1 Ulaanbaatar-210646, Mongolia
khasagr2001@yahoo.co.uk
|
| Concept Clearance |
08 Dec 2006 |
| Fact-finding |
14 Nov 2006
to 17 Nov 2006
|
| Approval |
20 Dec 2006 |
| ADB |
Others |
Gov |
Total |
Approved Amount |
Revised Amount |
|
$650,000.00
|
$0.00
|
$120,000.00
|
$770,000.00
|
$650,000.00
|
$566,621.40
|
| Total Commitment |
Uncommited Balance |
Total Disbursement |
Undisbursed Balance |
|
$566,621.40
|
$0.00
|
$566,621.40
|
$0.00
|
|
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