Funding unfunded pensions
نویسنده
چکیده
For many larger multinational companies, unfunded pensions represent an unmanaged risk and a growing liability. With the removal of the ‘corridor’ in the new IFRS IAS19R accounting regulations, unfunded pensions have become an increased source of volatility on the corporate balance sheet. Despite this, until today, funding unfunded pensions locally has either been too expensive or not possible. In this article, we explore the benefits of funding unfunded pensions and discuss potential investment strategies. The examples discussed below were generated using a stochastic model that examines 1,000 economic scenarios with different interest rates and stock markets returns.
منابع مشابه
Transition from a pay - as - you - go to a fully - funded pension system : The case of differing individuals and intragenerational fairness
In recent contributions to the theory of public pension systems it was argued that a Paretoimproving transition from an established unfunded pension system to a funded one is possible. This result is derived in an overlapping-generations model with identical individuals. In the present study an extended model, with differing individuals, of an intragenerationally fair unfunded pension scheme is...
متن کاملShould Public Retirement Plans be Fully Funded ?
Most state and local retirement plans strive for full funding, at least by actuarial standards. Funding measured at market values fluctuates and often falls short. A common argument for full funding is that pensions are a form of deferred compensation that does not justify a debt. The paper examines public finance, political economy, and financial market issues that bear on optimal funding, bro...
متن کاملNo. 2002-24 GENERAL-EQUILIBRIUM EFFECTS OF PRIVATISATION: THE MISSING PIECE IN SOCIAL SECURITY REFORM
This paper analyses the e¤ects of reducing unfunded social security in a closed economy that consists of a service sector and a commodity sector. It is shown that if old agents mainly demand labour intensive services, a modest decrease of the pay-as-you-go pension scheme still raises long-run utility as long as the economy is dynamically e¢cient. However, entirely privatising the social securit...
متن کاملPension Plan Funding and Corporate Debt Ratings
This article empirically examines the relationship between the funding of defined benefit pension plans and corporate debt ratings. The evidence indicates that unfunded pension liabilities reduce debt ratings more than an equivalent amount of excess pension assets increase debt ratings. This asymmetric relationship is consistent with the view that unfunded pension liabilities are corporate liab...
متن کاملOptimal Public Pensions: Full Coverage for End-of-Life Consumption
Public pensions and private saving are commonly considered complementary funding sources from which the elderly should draw simultaneously throughout their retirement. This paper shows that sequential use of funding sources would be significantly more effi cient —a period of entirely private funding followed by a period of consumption fully financed by public pensions. Thus the standard multi-p...
متن کامل