NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Funding in Public Sector Pension Plans - International Evidence

Eduard Ponds, Clara Severinson, Juan Yermo

NBER Working Paper No. 17082
Issued in May 2011
NBER Program(s):   PE

Most countries have separate pension plan for public sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may be hiding potentially huge fiscal liabilities that are being passed on to future generations of workers.

In order to arrive at a fair comparison between countries regarding the fiscal burden of their DB public sector pension plans, this paper gathers more evidence on public sector pension plans regarding the type of pension promise and quantifies the future tax burden related to these pension promises. The reported liabilities are recalculated using both a fair value approach (local market discount rates) and a common, fixed discount rate across all countries which reflects projected growth in national income. We also estimate for a number of plans from a sample of OECD countries the size of the net unfunded liabilities in fair value terms as of the end of 2008. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms.

download in pdf format
   (379 K)

email paper

This paper is available as PDF (379 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17082

Users who downloaded this paper also downloaded these:
Munnell, Aubry, and Quinby w16442 Public Pension Funding in Practice
Smetters and Theseira w17015 A Matter of Trust: Understanding Worldwide Public Pension Conversions
Pennacchi and Rastad w16456 Portfolio Allocation for Public Pension Funds
Beshears, Choi, Laibson, and Madrian w16728 Behavioral Economics Perspectives on Public Sector Pension Plans
Brown, Clark, and Rauh w16792 The Economics of State and Local Public Pensions
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us