The report also found:
• The bank's preferred three-pillar system — promoting government-administered plans, employer-sponsored plans and personal savings accounts — has hurt heavily indebted countries with limited tax bases, contributing to further deficits from high transition costs because the government must continue to pay pension benefits while diverting money into private funds.
• Pension portfolios remain poorly diversified, with many primarily invested in government bonds. That links returns too closely to the risk profile of the country and jeopardizes individuals' savings.
• The three-pillar system was supposed to limit government interference in retirement income, but during the Argentinean economic crisis in 2001, the government forced pension funds to service $132 billion in government debt.
• The bank still provides "little support" to develop social assistance for the elderly poor despite it being a stated element of its strategy.
"I have my severe doubts whether (the World Bank's) policy is useful in all the countries where it's being implemented," said Monika Queisser, Paris-based senior economist for the Organization for Economic Co-operation and Development and an international authority on pension reforms. An author who has written about Latin American pension policies, Ms. Queisser also worked at the World Bank from 1993 to 1997; she has read the report.
The report, which analyzed developments from 1994 to 2004 Central Europe and Latin America — where most of the World Bank's pension efforts have been targeted — was produced by the bank's independent evaluation group. It concluded that "there is little evidence that privately funded pillars have succeeded in increasing national savings or in developing capital markets. Furthermore, multipillar reforms have not increased pension coverage in most reforming countries."
The bank's focus on using pension reforms as a way of strengthening a country's overall economy also meant that it neglected "the broader goal of pension policy, that is, to reduce poverty and improve retirement income adequacy within a fiscal constraint."
"We're not saying that these countries don't need the World Bank's assistance; they do," said Peter Bakvis, director of the Washington office of the International Confederation of Free Trade Unions, who has read the report and agrees with its findings. "But the bank's approach, in general, has made things worse in many cases."
Chile's system of mandatory personal accounts, which helped inspire the bank's policy, recently came under attack not only in the report but also as an issue in the country's presidential election. Michelle Bachelet, who will be sworn in on March 11 as president, described the current pension system as a crisis during her campaign.
Dissatisfaction with the Chilean system hinges on whether enough contributions have been made for retirement at the same time that overhead costs remain high. Also, the government still spends about 5% of its gross national product on pensions, partly to pay for those who can't afford to contribute into the system, suggesting coverage has not improved to an acceptable level.
"We have come to realize that while the three-pillar system is a useful way of thinking, it is not sufficiently differentiated," said Robert Holzmann, director of the World Bank's social protection unit and an engineer of its pension policy. "We have evolved and have addressed some of these issues," but the recent policy changes are "inadequately reflected in the report."
For example, the bank has since introduced a "zero-pillar" concept that is fully government funded and provides a minimal level of protection for the elderly poor. In addition, the organization broadened its scope from countries with established pension systems to include more countries where pension systems are non-existent or cover only about 5% to 10% of the population.
"In many other smaller areas, we do agree with the report," Mr. Holzmann said. "For example, we are planning to propose a way to identify more clearly and more directly the (fiscal) conditions in a country before determining whether it's appropriate to implement a funded pension system."
This will help ensure that the role of pension reforms in helping develop a country's capital markets will be better executed, he said, adding the proposal will be published in a year's time.