Government guarantees on pension fund returns
AbstractThis report reviews defined contribution pension return guarantees typically made by governments in connection with pension privatizations. Finance theory related to the pricing of options provides a unifying framework for evaluating the cost of these guarantees. The report considers two types of guarantees on the rate of return earned by an individual pension fund: a guarantee of a fixed minimum rate of return; and a guarantee of a minimum rate of return that is set relative to the performance of other pension funds. A minimum pension benefit guarantee for a participant in a mandatory defined contribution pension plan is also discussed. Costs for each of these guarantees are illustrated using typical parameter values.
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Bibliographic InfoPaper provided by The World Bank in its series Social Protection Discussion Papers with number 20049.
Date of creation: 30 Apr 1998
Date of revision:
Banks&Banking Reform; Insurance&Risk Mitigation; Insurance Law; Economic Theory&Research; Economic Stabilization;
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