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Private pensions and government guarantees: clues from Canada

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  • NIELSON, NORMA L.
  • CHAN, DAVID K. W.
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    Abstract

    The Pension Benefits Guarantee Fund (PBGF) was established in the province of Ontario in 1980, thus creating in Canada a rare opportunity for intranational empirical research on the impacts of governmental protection on private plans and their participants. This paper examines Canadian data on pension plans for effects attributable to Ontario s government guarantees for some plans. We find that significant variables related to an increase in the number of pension plans in Canada are higher interest rates, a larger labour market, and, consistent with the deferred compensation theory from labour economics, lower real disposable income of workers. The number of members in pension plans is related significantly to the same variables and also to tax rates and unemployment. The analyses show that the Ontario environment for pension plans is significantly different from the rest of Canada. Those plans covered by the Pension Benefit Guarantee Fund exhibit a lower degree of funding per participant than do the remainder of the plans in the sample, supporting the argument that a government guarantee is related to a moral hazard problem in Ontario pension financing.

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

    Volume (Year): 6 (2007)
    Issue (Month): 01 (March)
    Pages: 45-66

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    Handle: RePEc:cup:jpenef:v:6:y:2007:i:01:p:45-66_00

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    Cited by:
    1. Thomas Crossley & Mario Jametti, 2008. "Pension Benefit Insurance and Pension Plan Portfolio Choice," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0809, USI Università della Svizzera italiana.
    2. Sule Sahin & Adem Yavuz Elveren, 2009. "A Cost Analysis of a Minimum Pension Guarantee for the Individual Pension System in Turkey," Working Paper Series, Department of Economics, University of Utah 2009_13, University of Utah, Department of Economics.

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