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Protecting Pensions

Policy Analysis and Examples from OECD Countries

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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.

English

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Reforming the valuation and funding of pension promises: are occupational pensions safer?

Since 2001, occupational defined benefit (DB) pension plans in OECD countries have experienced an adverse funding situation, that is, a low ratio of assets to liabilities. The decline in funding ratios can be traced to the low interest rate environment and poor equity market returns, together with longer term pressures such as revisions in life expectancy assumptions. Various regulatory initiatives have been undertaken to address these funding gaps, some providing forbearance to plan sponsors, others aiming at improving benefit protection outright. At the same time, new accounting standards have been introduced which aim at shining a bright light on what has been historically a rather obscure but major component of the balance sheet of pension plan sponsors.

English

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