The sustainability of pension schemes
AbstractPoor financial market returns and low long-term real interest rates in recent years have created challenges for the sponsors of defined benefit pension schemes. At the same time, lower payroll tax revenues in a period of high unemployment, and rising fiscal deficits in many advanced economies as economic activity has fallen, are also testing the sustainability of pay-as-you-go public pension schemes. Amendments to pension accounting rules that require corporations to regularly report the valuation differences between their defined benefit pension assets and plan liabilities on their balance sheet have made investors more aware of the pension risk exposure for the sponsors of such schemes. This paper sheds light on what effects these developments are having on the design of occupational pension schemes, and also provides some estimates for the post-employment benefits that could be delivered by these schemes under different sets of assumptions. The paper concludes by providing some policy perspectives.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 368.
Length: 25 pages
Date of creation: Jan 2012
Date of revision:
funds; service cost; contribution rates; mortality rates; long-term real interest rates; real wages; sovereign liabilities; pay-as-you-go schemes;
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-01-10 (Economics of Ageing)
- NEP-ALL-2012-01-10 (All new papers)
- NEP-LAB-2012-01-10 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, Jeffrey R. & Clark, Robert & Rauh, Joshua, 2011.
"The economics of state and local pensions,"
Journal of Pension Economics and Finance, Cambridge University Press,
Cambridge University Press, vol. 10(02), pages 161-172, April.
- Claudio Borio, 2012. "The financial cycle and macroeconomics: What have we learnt?," BIS Working Papers 395, Bank for International Settlements.
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