NDLI: Benefit Security Pension Fund Guarantee Schemes

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Managing Investment Risk in Defined Benefit Pension Funds

Policy Action in Private Occupational Pensions in Japan since the Economic Crisis of the 1990s

Pension Funds' Risk-Management Framework. Regulation and Supervisory Oversight.

Investment Regulations and Defined Contribution Pensions

Private Pensions and Policy Responses to the Financial and Economic Crisis

Defined-Contribution (DC) Arrangements in Anglo-Saxon Countries

Evaluating the Design of Private Pension Plans. Costs and Benefits of Risk-Sharing.

Licensing Regulation and the Supervisory Structure of Private Pensions. International Experience and Implications for China.

Pension Fund Investment in Infrastructure

Pension Coverage and Informal Sector Workers. International Experiences.

Pensions in Africa

Ageing and the Payout Phase of Pensions, Annuities and Financial Markets

Fees in Individual Account Pension Systems. A Cross-Country Comparison.

Description of Private Pension Systems

Comparing Aggregate Investment Returns in Privately Managed Pension Funds. An Initial Assessment.

Forms of Benefit Payment at Retirement

Policy Options for the Payout Phase

National Annuity Markets. Features and Implications.

Accounting for Defined Benefit Plans. An International Comparison of Exchange-Listed Companies.

Pension Fund Performance

Coverage of Funded Pension Plans

Pension Fund Governance. Challenges and Potential Solutions.

Funding Regulations and Risk Sharing

Evaluating the Impact of Risk Based Funding Requirements on Pension Funds

Sovereign Wealth and Pension Fund Issues

Governance and Investment of Public Pension Reserve Funds in Selected OECD Countries

Pension Fund Investment in Hedge Funds

Collective Pension Funds. International Evidence and Implications for China's Enterprise Annuities Reform.

Reforming the Valuation and Funding of Pension Promises. Are Occupational Pension Plans Safer?.

Implications of Behavioural Economics for Mandatory Individual Account Pension Systems

Portfolio Investment in an Intertemporal Setting. Assessment of the Literature and Policy Implications for Latin American Pension Systems.

Pension Fund Regulation and Risk Management. Results from an ALM Optimisation Exercise.

Governments and the Market for Longevity-Indexed Bonds

Benefit Security Pension Fund Guarantee Schemes

Longevity Risk and Private Pensions

Benefit Protection. Priority Creditor Rights for Pension Funds.

Policy Issues for Developing Annuities Markets

Survey of Investment Choice by Pension Fund Members

Funding Rules and Actuarial Methods

Benefit Security Pension Fund Guarantee Schemes

Content Provider	OECD iLibrary
Author	Stewart, Fiona
Abstract	The issue of pension benefit security has returned to the foreground of both economic and political debate in many OECD countries - following high profile losses of pension benefits due to plan sponsors becoming bankrupt and leaving underfunded pension schemes. Some countries have dealt with pension benefit protection via strong funding rules (the route taken for example by the Dutch authorities). Two OECD papers examine other methods for increasing benefit security in retirement – via pension benefit guarantee schemes (such as the Pension Protection Fund recently introduced in the UK) and the position of pension creditors within insolvency proceedings (which has been examined, for example, in Canada). Pension Benefit Guarantee Schemes are insurance type arrangements - with premiums paid by pension funds - which take on outstanding obligations which cannot be met by the insolvent plan sponsors. Arguments for such schemes stem from ‘market failure’ (with workers not fully understanding the trade off between pensions – deferred wages – and current income), and diversification– as most workers are highly exposed to the insolvency of the plan sponsor (in terms of current and retirement income) and cannot properly diversify this risk (particularly where the pension is funded by book reserves). However challenges to these schemes exist – mainly in the form of moral hazard and adverse selection – which are problems for all insurance contracts, and potentially in the form of systematic risk (as bankruptcies tend to be correlated, as does pension underfunding across schemes, and indeed as are these two factors). Though setting up benefit guarantee schemes successfully is often a challenge in practice (particularly maintaining true political independence), they can be run successfully - as the funds operating in practice show. Though the problems of the USA guarantee scheme, the PBGC, are well known, similar schemes also exist in Sweden, Germany, Ontario – Canada, Switzerland and Japan and one has recently been launched in the UK. Lessons can be learnt from all these schemes - for example the UK’s PPF is working to apply fully risk adjusted premiums, whilst the Swedish fund can take a lien on plan sponsor’s assets to protect its own financial position. One of the key conclusions from the OECD’s report is that, to work effectively, these schemes must have suitable independence and powers to set and collect appropriately risk-adjusted premiums – but they also need to be considered along with other benefit protection policies (notably effective funding rules).
Language	English
Publisher	OECD Publishing
Publisher Date	2007-01-01
Access Restriction	Open
Subject Keyword	Finance and Investment
Content Type	Text
Resource Type	Article

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