Nadine Leiner-Killinger

Pension Funds and Financial Markets: Evidence from the New EU Member States

The recently established pension funds in the new EU Member States face investment risks that stem from a challenging macroeconomic environment, including, inter alia, volatile inflation and shallow domestic capital markets. The question arises whether a move to funded pension system in such a volatile economic environment always increases the long-term sustainability of public finances. Against this background, this paper surveys the main challenges for pension systems and public finances in the new EU Member States and provides evidence on pension fund performance in recent years. We conclude that in some of these countries the limited diversification of assets, the impact of high inflation as well as the financial market turmoil may have indeed reduced the positive impact of systemic pension reforms on fiscal sustainability.