Protecting Pensions
Policy Analysis and Examples from OECD Countries
Pension fund members across OECD countries have seen the loss or reduction of pension benefits in recent years. This has been associated with declining assets and increasing liabilities, with accounting and regulation changes crystallising these problems. Consequently, the issue of how to protect pension benefits has returned as a major topic of policy debate for many governments and for the pension industry worldwide. OECD countries have responded in different ways:
- Re-examining and altering accounting and funding rules;
- Strengthening or introducing pension benefit guarantee schemes; and
- Looking at the related issue of whether pension benefits should receive protection in bankruptcy and insolvency procedures.
Finally, debate has also focused on whether pension fund related risks can or should be shared, with guarantees for insured or pension products attracting renewed attention.
This volume looks at various methods of protecting pension benefits. It provides in-depth information on the application of these methods in OECD countries and analyses their advantages and drawbacks. Methods of risk sharing amongst pension fund beneficiaries, providers and sponsors are discussed through an analysis of insured pension contracts and of the pension systems in place in Denmark and Iceland. This publication offers unique international comparative and analytical data for policy makers and pension industry participants globally.
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Pension Fund Guarantee Schemes
The issue of pension benefit security is currently in the foreground of both economic and political debate in many OECD countries. After a ‘golden age’ for pension funds, which enjoyed high investment returns and funding surpluses throughout the 1990s, a more troubled period has emerged since the start of the millennium. With equity market corrections, (and the subsequent questioning of long-term equity return assumptions), a low interest rate environment, asset liability mismatches, severe underfunding (highlighted by accounting changes), ageing populations, financial scandals and loss of pension benefits, the whole defined benefit pension system in many countries is under assault. Once the rise in defined contribution schemes (and the uncertainty they inherently entail) as well as the scaling back of government pensions are also taken into consideration, people of all ages are rightly asking what retirement income they can rely on? Though the subject has been debated on many occasions, recent events have ensured that the topic of pension benefit security has once again become a focus for policy discussion.