It has been used in two different occasions so far, first for a new plan to be launched in Benin, and for an existing one (Ejo Heza LTSS) in Rwanda, both for the informal sector. The model can be customized to any defined contribution plan design and includes a scenario testing module. The SVAT uses baseline data from the plan (if one exists) or survey data (if a new plan is being designed) to inform its assumptions of coverage and savings. The model projects expenditures and potential revenues over a period of 40 years. The tool was developed in response to demand by governments in the Africa region that have launched such plans or are considering doing so. The World Bank Social Protection and Jobs Practice, in collaboration with the World Bank Pension Department, has developed a Scheme Viability Assessment Tool (SVAT) to assist new and existing voluntary plans in carrying out a viability assessment. The World Bank has developed a defined contribution Scheme Viability Assessment Tool But there is no return without risk, and a particular attention should be paid in the choice of this parameter, which should be driven only by financial considerations. Hence, temptation is high to make this central assumption as “appealing” as possible, to both attract new participants and again shorten the breakeven horizon. As such, it represents a source of revenues for participants as for the plan itself.

But it also plays a central role in determining financial viability, because the costs of running theplan are usually covered by a portion of the return on invested assets. Maximizing the net real return on members’ savings is important to build trust and interest in the plan. The net real return on savings is central for the “social” and “financial” viability Only a robust viability assessment will help finding the right balance. The “how” is a function of both actionable levers and exogeneous parameters: communication and outreach, behavioral nudges and non-monetary or monetary incentives will influence the take-up rates, but at a cost.Īs usual, there exists an inverse relationship between the “when” and “how”: Incentives may hasten the growth in coverage and savings and bring forward the breakeven point while increasing the overall cost of running the plan. Before it is reached, a sponsor, usually the government, must cover the costs of running the plan. The “when” is nothing but the breakeven point.

the number of active contributors large enough for its fixed costs to be self-financed by its revenues. Ultimately, the key questions to answer are when and how the savings plan will reach the critical mass of participants, i.e. The assessment should project both the costs (fixed and variable components) and benefits. The assessment should allow all stakeholders to make an informed decision on whether launching the plan makes “financial” sense and what budget support would be needed before it can become self-sustainable. But launching such a plan could trigger a lot of questions for policy makers and practitioners those that can only be answered through an in-depth viability assessment.Īssessing the viability of a voluntary savings plan is no different from a business case development exercise, except that, because it deals with old-age savings, projections are conducted for a time span of 40 years or more. In the wake of the COVID-19 (coronavirus) pandemic, flexible voluntary savings plans that could be tapped for immediate needs (unemployment, health care, housing, etc.) and encourage participants to save for old age could also respond to the social protection needs of non-poor informal (NPI) households, which account for a large share of the population in Africa.

Svat monitor