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

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  • Juan Yermo
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    Abstract

    This paper assesses current regulatory and accounting developments in the OECD area against their purported goals. It specifically considers the different approaches to valuing pension liabilities and questions the possibility of convergence between funding and business accountants' valuation standards for pension liabilities. It concludes that the trend towards market-based valuation methods in business accounting is not entirely consistent with the parallel exercise undertaken by many pension regulators. Since valuation methods for funding purposes are likely to continue moving towards a market-based model, policymakers should be all the more cautious in setting funding regulations so as to provide sufficient flexibility to pension funds in covering funding deficits while providing incentives to establish funding buffers in good economic times. We also argue that accounting rules and regulatory changes are driving plan design in some OECD countries such as Japan, the Netherlands and the United Kingdom and can lead to procyclical investment behaviour by pension funds. Réformer l'estimation et le financement des promesses sur les retraites : les plans de retraite professionnels sont-ils plus sûrs ? L‘auteur évalue dans ce document les évolutions actuelles des dispositions réglementaires et comptables dans la zone OCDE au regard de leurs objectifs supposés. Il examine plus précisément les différentes méthodes d'évaluation des engagements au titre des retraites, et s'interroge sur la possibilité d'une convergence entre les méthodes d'évaluation de ces engagements utilisées aux fins de financement, d'une part, et celles employées par les comptables d'entreprises, d'autre part. L'auteur parvient à la conclusion que l'évolution de la comptabilité d'entreprise vers des méthodes d'évaluation fondées sur les mécanismes de marché ne concorde par tout à fait avec l'exercice parallèle entrepris par de nombreuses instances de réglementation des retraites. Selon l'auteur, il est probable que les méthodes d'évaluation utilisées aux fins de financement continueront à évoluer vers un modèle fondé sur les mécanismes de marché. Compte tenu de cette tendance, les responsables de l'action publique devraient se montrer extrêmement prudents dans l'élaboration des règles de financement, de manière à laisser aux organismes de retraite des marges de manoeuvre suffisantes pour couvrir leurs déficits de financement, tout en les incitant à constituer des fonds de réserve en période de conjoncture économique favorable. Toujours selon l'auteur, les modifications des dispositions comptables et réglementaires influent sur la conception des plans de retraite dans certains pays de l'OCDE, comme le Japon, les Pays-Bas et le Royaume-Uni, et elles peuvent déboucher sur des comportements d'investissement procycliques de la part des organismes de retraite.

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    File URL: http://dx.doi.org/10.1787/078561284626
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Working Papers on Insurance and Private Pensions with number 13.

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    Date of creation: Jul 2007
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    Handle: RePEc:oec:dafaab:13-en

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    Keywords: accounting; pension fund; funding rule; defined benefit; discount rate; fair value; investment; valuation method; actuarial method; prestation définie; méthode d'évaluation; juste valeur; organisme de retraite; taux d'actualisation; méthode actuarielle; règle de financement; investissement; comptabilité;

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    Cited by:
    1. Broeders, D.W.G.A., 2010. "Essays on the valuation of discretionary liabilities and pension fund investment policy," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4054631, Tilburg University.
    2. Ian Tower & Gregorio Impavido, 2009. "How the Financial Crisis Affects Pensions and Insurance and Why the Impacts Matter," IMF Working Papers 09/151, International Monetary Fund.

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