Pension Risk and Risk-Based Supervision in Defined Contribution Pension Funds
Defined contribution pension systems have faced criticism in the wake of the financial and economic crisis for not delivering adequate and sustainable pension incomes at retirement. Much of the problem has centered around the misalignment of pensio...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/03/19288694/pension-risk-risk-based-supervision-defined-contribution-pension-funds http://hdl.handle.net/10986/18355 |
| Summary: | Defined contribution pension systems
have faced criticism in the wake of the financial and
economic crisis for not delivering adequate and sustainable
pension incomes at retirement. Much of the problem has
centered around the misalignment of pension fund management
companies and the interests of pension fund members, with
the focus on short-term volatility rather than delivering
adequate pension income over the long term. Although pension
fund supervisors in emerging economies have attempted to
correct for these market failures, they have not focused
sufficiently on the ultimate long-term pension income
objective. The paper suggests that in order to have a
meaningful impact on future pensions, the supervision of
defined contribution pension systems needs to take a more
proactive role in minimizing pension risk. This objective
would require ensuring that investment risks are aligned
with the probability of achieving a target pension at
retirement age. The paper also suggests that a proper
institutional design of the pension fund industry and
intensive use of market surveillance are efficient tools for
dealing with most of the operational risks of funded pension
fund schemes in emerging economies. |
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