Actuarial forecasts for the new national pension scheme in the Dominican Republic

The Dominican Republic introduced a systemic reform of the national pension scheme as from 1 June 2003, replacing the imperfect state-run defined benefit scheme with a substitutive scheme that is privately run. The new scheme came into being on the eve of a severe economic crisis and investment restrictions on Central Bank issues led to a negative real yield of 22 per cent in its first year of operation, although a return to a positive cumulative yield was forecast for the second half of 2005. The new scheme has been unable to increase overall coverage, requires structural and operational adjustments and has not yet credited the value of capitalized recognition bonds to individual accounts. It is thus essential to allow the thousands of older members who were transferred to the funded scheme and whose pensions will be far below what they would have been under the pay-as-you-go scheme to rejoin the latter if they wish to do so, as well as to take steps to improve the transparency of the annuities market and eligibility for disability and survivors' pensions.