Uncertainty about length of life, longevity risk, is a growing financial problem for pension funds and annuity providers. They would like to transfer longevity risk away to institutions better placed to deal with it. Unfortunately, there is a lack of financial instruments to hedge against this longevity risk, thereby complicating risk management by pension funds and hindering the expansion of the...
The issue of pension benefit security has returned to the foreground of both economic and political debate in many OECD countries - following high profile losses of pension benefits due to plan sponsors becoming bankrupt and leaving underfunded pension schemes. Some countries have dealt with pension benefit protection via strong funding rules (the route taken for example by the Dutch authorities)....
This paper provides a stylised assessment of the impact of investment-relevant pension fund regulations and accounting rules on contribution and investment strategies within the context of an asset-liability model (ALM) specifically designed for this purpose. The analysis identifies a substantial impact of regulations which, in a simplified way, resemble those in place in Germany, Japan, the...
Sovereign Wealth Funds (SWFs) are pools of assets owned and managed directly or indirectly by governments to achieve national objectives. These funds have raised concerns about: (i) financial stability, (ii) corporate governance and (iii) political interference and protectionism. At the same time governments have formed other large pools of capital to finance public pension systems, i.e. Public...
The objective of this study is to analyse what the quantitative funding requirements for pension funds with defined benefit plans would be, if Solvency II (based on the QIS 3 methodology) would be applied. Also possible extensions of the Solvency II methodology that seem necessary in order to reflect the specifics of pension funds will be discussed. El objetivo de este estudio es analizar cuáles...
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...
This paper reviews the impact of ageing on private pensions, in particular on the payout phase, assesses the part that annuities can play in financing retirement, and examines the role of financial markets in facilitating the allocation on assets accumulated in defined contribution pension plans. A comprehensive set of recommendations for discussion is provided at the end of the paper. Este...
The principal purpose of this paper is to analyse the trade-off between the uncertainty in contributions on the one hand and benefits on the other that is embedded in different pension arrangements. The paper employs the funding ratio (ratio of assets to liabilities) and the replacement rate (ratio of benefits to salaries) as key criteria for evaluating the risk sharing characteristics of a...
Three essential goals of pension plan funding are the long-term viability, stability and security of member benefits. Reform of funding regulations for defined benefit (DB) pension schemes to make them more counter-cyclical in nature can help achieve these goals as well as make DB schemes more attractive to plan sponsors that are increasingly moving away from DB towards defined contribution plans....
It is estimated that transitioning to a low-carbon, and climate resilient economy, and more broadly „greening growth? over the next 20 years to 2030 will require significant investment and consequently private sources of capital on a much larger scale than previously. With their USD 28 trillion in assets, pension funds - along with other institutional investors - potentially have an important role...
