The first is a limited reform, which would involve keeping the present system intact but making minor changes to make it both more financially sustainable in the near term and more equitable. Limited reform would attempt to make the system more financially sustainable by raising the normal retirement age, raising the contribution rate, decreasing benefits, or better investing the system's reserves. This pillar would be supplemented by a public pension system, much smaller than the current one, that would provide a social safety net. Finally, the third pillar would consist of optional but funded company-based or occupational pension schemes and voluntary savings in the form of bank deposits, marketable securities, and investments in real assets. The costs and characteristics of the two strategies depend on the specific components chosen.
Radical reform can include more options.
The proposal considered here is fairly expensive. The limited reform would save money, but would still entail relatively high costs over the long term. The universal pension to be provided under the radical reform would also entail rising costs owing to the aging of the population. However, these costs could be lowered by restricting pensions to those who had contributed to the pension system or only to those whose incomes fell below the poverty line. At first, the multipillar system pays less because retirees will have accumulated savings for only 10 years.