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Funding Regulations and Risk Sharing


  • Colin Pugh


  • Juan Yermo



This paper provides a description of the risk-sharing features of pension plan design in selected OECD and non-OECD countries and how they correspond with the funding rules applied to pension funds. In addition to leading to a better understanding of differences in funding rules across countries with developed pension fund systems, the study considers the trend towards risk-based regulation. While the document does not enter the debate over the application of risk-based quantitative funding requirements to pension funds (as under Basel II or Solvency II), it identifies the risk factors that should be evaluated and considered in a comprehensive risk-based regulatory approach, whether prescriptive or principles-based. The three main risk factors identified are the nature of risks and the guarantees offered under different plans designs, the extent to which benefits are conditional and can be adjusted, and the extent to which contributions may be raised to cover any funding gap. In addition, the strength of the guarantee or covenant from the sponsoring employer(s) and of insolvency guarantee arrangements should be carefully assessed when designing funding requirements. Réglementation de la capitalisation et partage des risques Ce document décrit les caractéristiques de la conception des plans de retraite dans un certain nombre de pays appartenant ou non à l‘OCDE en se plaçant sous l‘angle du partage des risques. Il vérifie en outre si ces caractéristiques correspondent aux règles de capitalisation applicables aux fonds de pension. Au-delà de sa contribution à la connaissance des différences entre les règles de capitalisation dans les pays dotés de systèmes développés de fonds de pension, l‘étude examine la tendance à l‘adoption de règles fondées sur les risques. Même si le document n‘entre pas dans le débat sur l‘application de normes quantitatives de capitalisation en fonction des risques (comme le font Bâle II ou Solvabilité II), il identifie les facteurs de risques qui doivent être évalués et examinés dans le cadre d‘une démarche globale de la réglementation fondée sur les risques, que cette démarche soit prescriptive ou qu‘elle repose sur des principes. Les trois principaux facteurs de risques identifiés sont la nature des risques et les garanties proposées par les différents concepts de plans, la conditionnalité et les possibilités d‘ajustement des prestations, et les possibilités de relèvement des cotisations en cas de capitalisation insuffisante. En outre, il convient d‘évaluer soigneusement la solidité de la garantie ou des engagements relevant de la responsabilité du ou des employeurs à l‘initiative du plan lors de la mise au point des conditions de capitalisation.

Suggested Citation

  • Colin Pugh & Juan Yermo, 2008. "Funding Regulations and Risk Sharing," OECD Working Papers on Insurance and Private Pensions 17, OECD Publishing.
  • Handle: RePEc:oec:dafaab:17-en

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    Cited by:

    1. Broeders, Dirk & Chen, An, 2010. "Pension regulation and the market value of pension liabilities: A contingent claims analysis using Parisian options," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1201-1214, June.
    2. Ivanka Daneva, 2009. "Investment Risk Management in Private Pension Systems," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 19-34.
    3. 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.

    More about this item


    capitalisation; cotisations définies; defined benefit; defined contribution; fair value; fonds de pension; funding; hybrid plans; juste valeur; partage des risques; pension fund; plans hybrides; prestation définie; risk sharing;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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