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PurposeThis study mainly aimed to show that financial literacy is not always enough in explaining workers' individual pension plan ownership as financial literacy knowledge does not always result in financially literate decisions/actions, and in such cases perceived consumer risks can be used to explain the IPP ownership decision of workers.Design/methodology/approachThe data were collected via a questionnaire adapted from earlier questionnaires using convenience and snowball sampling methods with Internet based applications such as Facebook, Twitter, Instagram and WhatsApp. T-tests, ANOVA and Chi-Square tests were conducted to find out if there is a relation/interaction between individual pension plan (IPP) ownership and financial literacy, and perceived consumer risks (N = 651).FindingsIt is found out that financial literacy level does not have a statistically significant relation with individual pension system (IPS) involvement of workers in Turkey, but perceived consumer risks show differences based on IPP ownership.Originality/valueTo the best of authors’ knowledge, this study contributes to the literature being the first paper to study the relationship between financial literacy and workers' IPP ownership decisions in Turkey and it also shows that perceived consumer risks can be used for explaining workers' IPS involvement in cases where financial literacy knowledge does not translate into financially literate decisions.

A majority of career teachers in Missouri defined benefit pension plan reach their pension wealth peak before their 31st year of service. The 2002 pension enhancement in Missouri generates a local ...

Ghana’s economy is predominantly informal with about 80% of workers in small enterprises run and managed by family members with no fixed retirement procedures. Although, retirement is basically an individual decision, it has social policy implications for the nation as a whole. The purpose of this study is to provide empirical evidence on what is likely to inform the decision to retire for the over 50s in Ghana’s informal economy. This is to ensure the development of effective policies for the ageing informal work force. Using an exploratory sequential method, to examine the understanding and preferred type of retirement, family business owners aged 50 years and above participated in a study, (n = 35 qualitative; n = 383 quantitative), conducted in Kumasi, Ghana’s second largest city. Findings, revealed that retirement for business owners, largely meant a gradual withdrawal from economic activities. Also, gender, family and work-related factors significantly predicted retirement decision-making of family business owners. Recommendations included tailored retirement planning education by both Social Workers and insurance providers, and a more flexible phased pension plan for those in the informal economy to ensure the wellbeing of aging self-employed who have poor health and are financially insecure.

In recent years, there has been a dramatic increase in the hard-freezing of defined benefit pension plans. Although cost savings associated with a pension freeze are expected to lead to improved future performance, prior studies do not provide conclusive empirical evidence to support enhanced firm performances following pension freezes. In this study, we examine how firms’ commitment to corporate social responsibility (CSR), especially their commitment to employee relations, affects their decision to freeze pension plans, and how firms’ CSR activities affect the association between the pension freeze and their post-freeze performance. First, we find no evidence that firms with a high overall CSR score are less likely to freeze their pension plans, but we find supporting evidence that firms with a high CSR score on the employee relation aspect are less likely to freeze their pension plans. In addition, we find that the pension freeze has a positive impact on the firm’s future performance, as measured by the return on assets, for the firms with high CSR scores.

In this study, we examine whether the stock market pricing of the funding status of pension plans has improved after the adoption of SFAS 158. We find that the overvaluation of firms with severely ...

Statement No. 26, Accounting Standard for Retirement Benefits, requires Japanese firms to recognize previously off-balance sheet pension liabilities on their balance sheets. We explore auditors' responses to recognized versus disclosed pension liabilities in the Japanese audit market. We use a pre-Statement No. 26 versus post-Statement No. 26 setting to analyze whether and how disclosed versus recognized pension information affects audit fees and costs. We show that disclosed pension liabilities are processed similarly to recognized previously off-balance sheet pension liabilities when audit fees are determined. However, we find that associations with audit costs differ between disclosed and recognized pension liabilities. We also find that audit costs' differential relations with disclosed and recognized pension liabilities are particularly pronounced for firms with a large pension plan deficit. Overall, our results suggest that auditors scrutinize recognized amounts more closely than disclosed financial information, thereby increasing the reliability of accounting information. JEL Classifications: M41; M42; M48.

This paper analyzes whether nudging has a relevant effect on financially literate individuals, even if these individuals are professionals with extensive experience of finance and pensions. The paper presents the results of a field experiment with employees of a leading life and pensions company in Spain. The results of the experiment show that financial literacy and awareness of the importance of saving are not enough for individuals to act. Even with pension plan experts, the combination of two types of instruments is necessary: rational instruments, such as financial literacy and awareness of the economic implications of retirement, and nudging, which moves individuals to action in a meaningful way. In this case, an effective approach is to use the default option to increase long-term saving patterns. The Ahorra+ program, which was implemented in 2016 with 282 employees and in 2017 with 405 employees, significantly increases voluntary savings and helps people prepare for retirement.

We analyze late-career teacher turnover induced by pension incentives. Using longitudinal data with performance measures for Tennessee public school teachers, we find higher quality teachers are less likely to retire conditional on age and experience. To quantify the effects of pension incentives, we estimate a structural model for retirement and find that high quality teachers have a lower disutility for teaching relative to retirement. We use the structural estimates to simulate the effect of changes in retirement incentives. Enhancements to traditional plans accelerate teacher retirement, whereas targeted retention bonuses delay retirement and retain high quality teachers at relatively modest cost.

The number of aging population (age 65 years and above) is expected to increase and grow double digit by the 2030s (Employees' Provident Fund (EPF), 2015). This scenario implies that there should be enough effort and preparation done by an individual or government to face any difficulties especially with regards to financial stability of people on their golden age. In view of this issue, this research aims to study existing retirement/pension plan offered by different countries in the world and Malaysian pension system. This study also highlighted the issues and challenges faced by existing retirement system and ways of reformation. To achieve the said objective, this research is conducted qualitatively based on literature review and observation on existing retirement planning that offered by selected countries in the world. The findings of this study will enable policy makers and researchers to consider further development in regards to the reformation needed to the retirement plan.

How much of the enhanced Canada Pension Plan (CPP) benefit will make its way into the pockets of Canadian seniors, after it filters through Canada’s complex tax and social benefit system as income? How much will it help Canadians to maintain their living standards in retirement? To answer these and other questions, this study builds on Statistics Canada’s LifePaths dynamic microsimulation model of the Canadian population to project the implications of the CPP enhancements at full maturity (years 2070–2074). The enhancements will on average increase CPP benefits by 44 per cent across Canadian seniors. For every dollar of new CPP benefits a worker earns, approximately 62 cents will make it into their pocket. This proportion is reasonably consistent across Canadians with different lifetime earnings levels, but the dynamics vary greatly as larger CPP benefits are offset by diverse combinations of higher taxes and reduced payments from Old Age Security and Guaranteed Income Supplement. The enhancements will improve the retirement income adequacy of Canadians, particularly the third of the population without significant workplace pensions in retirement, helping an additional 12 per cent of this group to maintain their living standards in retirement.

We return to the long-standing question ‘Who owns the assets in a defined benefit pension plan?’ Unlike earlier studies, we condition the market's assessment of implicit property rights on the sponsoring firm's financial health. Valuations of financially strong firms, and those that are strengthening, are more responsive to pension plan funding. For these firms, each extra dollar of net plan assets is valued at between $0.50 and $1.00. In contrast, for weak and weakening firms, valuation effects are statistically indistinguishable from zero. This result is consistent with the higher likelihood that they will renege on their pension obligations.

This paper concentrates on the premium valuation of pension insurance provided by the Pension Benefit Guaranty Corporation (PBGC). The PBGC provides a defined benefit pension sponsor with coverage in case that the pension fund fails to make pension payments as promised or that the plan sponsor does not stay in business any more. In practice, both the pension fund and the sponsor assets play a critical role in fulfilling the commitment of pension payments, and thereby it is not reasonable to isolate the risk of distress termination of the sponsor assets from that of the premature termination of the pension fund. Different from previous works in which the premature termination of the pension fund and the distress termination of the sponsor assets are analyzed separately, our model examines the situation in which retirees suffer the risk of two types of terminations at the same time. We evaluate the risk-based fair premium under the framework that the pension fund and the sponsor assets are correlated and subject to the risk of the involuntary termination (i.e., premature termination) and the distress termination, respectively. In this framework, we manage to obtain closed-form pricing formulas. Our model is more practical because of the realistic design of termination schemes. Numerical simulations are also carried out to demonstrate our findings. Our numerical experiments validate that a variable rate premium is more appropriate for the PBGC to implement.

Since the late 1990s, a performance fee arrangement has been approved as a managerial incentive in direction contribution (DC) pension plan management to motivate managers. However, the fact that m...

The impact of a switch of management company on pension plan fees is analysed by comparing the effects on employer-sponsored versus individual defined-contribution private pension plans in Spain. This framework is ideal because the two types differ significantly both in plan governance structure and consequently in the degree of bargaining power held by the decision-maker. In addition, intense bank restructuring, which has greatly modified the Spanish pension plan map, provides an interesting analytical context for the identification of causal links, because it is a scenario that features shocks exogenous to the relationship under analysis. The results show that a switch of management company significantly reduces management fees for employer-sponsored plans when the management change is not due to the bank restructuring process, on the contrary a switch of management company increases fees for individual pension plans. Financial support from the Spanish Ministry of Economy and Competitiveness (ECO2016-77631-R), the Spanish Ministry of Science and Innovation (PID2019-104304GB-I00/AEI/10.13039.501100011033), and Fundación Caja Navarra FUNCAN-07445 are gratefully acknowledged.

As citizens, slowly but increasingly, we are translating our concerns about social and environmental problems into our purchasing and consuming behaviors. These concerns must also be taken into account when making decisions about how to invest the money we save, that is, in which bank and in which financial instrument to deposit our money.

In this modern age, the quality of life of a person is always improving. This leads to longer lifespans, hence resulting in a longer pension period for that individual. Pension programs are therefore needed more than ever so that a person can receive a benefit after they retire and maintain the same quality of life they had before they retired. The topic of this paper is comparing the entry age normal and projected unit credit method for funding of a defined benefit pension plan. The entry age normal method uses the concept of projecting the benefit that will be earned at the end of an employee’s career. The projected unit credit method uses the concept of benefits accrued to the date of normal cost determination. From the data simulation it can be concluded that the projected unit credit method results in a smaller normal cost compared to the entry age normal method and the projected unit credit method results in a greater actuarial liability compared to the entry age normal method.

Resumen El objetivo del presente trabajo es comparar el resultado financiero de los fondos de inversión -planes de pensiones- cuyos gestores manejan simultáneamente el patrimonio perteneciente a planes de pensiones -fondos de inversión- con aquel alcanzado por los fondos de inversión -planes de pensiones- y están especializados en gestionar el patrimonio de un tipo de institución de inversión colectiva. Para ello, se dispone de datos correspondientes a 115 planes de pensiones y 336 fondos de inversión que invierten en renta variable y están domiciliados en España relativos a rentabilidad ajustada al riesgo, comisiones de gestión y depósito, patrimonio, fecha de creación, número de participantes, entidad gestora desde febrero de 2007 hasta junio de 2011. Sobre estos datos se aplica la técnica bootstrap. Los resultados obtenidos indican que no hay una relación significativa entre la gestión conjunta y resultado financiero en las industrias de los fondos de inversión y los planes de pensiones. Por tanto, no se encontró evidencia de que los partícipes de planes de pensiones estén siendo explotados. JEL: G23; G11; J32; M21. Abstract The purpose of this paper is to compare the performance of mutual funds -pension plans- whose managers simultaneously manage the assets belonging to pension plans -mutual funds- with that achieved by mutual funds -pension plans- whose managers only manage the assets belonging to mutual funds -pension plans-. To do this, we present a sample consisting of data corresponding to 115 Spanish equity pension plans and 336 Spanish equity mutual funds in relation to such aspects as risk-adjusted return, management and custodial fees, asset size, creation date, number of participants, name of the asset management companies for the period between February 2007 and June 2011. On this data, we propose a model using the bootstrap technique. The results obtained show no significant relationship between side-by-side management and financial performance in the mutual fund and pension plan industries. Therefore, we do not find evidence that pension plan investors are being exploited. JEL: G23; G11; J32; M21.

We examine whether Governmental Accounting Standards Board (GASB) financial statement disclosure influences local governments’ economic decision-making. To do so, we exploit a recent GASB standard that differentially changed the disclosure requirements for pension obligations for county governments. The standard, GASB 68, had no effect on pension economics nor on the annual budget—it only affected whether and how information was presented on GASB financial statements and did so differently depending on the type of pension plan sponsored by the county. Using a broad hand-collected dataset, we document that newly disclosing counties reduced public welfare expenditures, employment, and salary expenses relative to those that had disclosed such information prior to GASB 68. We conduct extensive field research and employ several cross-sectional analyses to conclude that the effects we document are likely driven by increased awareness of the financial costs of pension obligations by newly disclosing counties. More specifically, we find that GASB 68 changed these counties’ perspective of their pension arrangement from a bill (i.e., the county only has to make an annual pension contribution) to a liability (i.e., the county is ultimately responsible for funding the pension deficit), and that this new perspective generated the documented fiscal response.

A board’s ability and disposition to monitor management, estimated as Board Co-option, affects the firm’s pension policy. I implement a novel board monitoring measure as the percentage of directors appointed after the CEO assumes office, Board Co-option, and find that as Board Co-option increases, board monitoring decreases, and risk shifting through pension plan underfunding and pension assets allocation towards risky securities intensifies. Within independent board of directors, my results indicate that only non-coopted independent board members are effective monitors of the corporate pension policies. I identify these effects through the firm-fixed effect model and difference-in-differences estimations. Overall, my findings suggest that not all directors are effective monitors in the context of corporate pension policies. It seems only non-co-opted independent directors are mindful of their obligations toward pension plan beneficiaries.

Does New York City's teacher pension plan provide sufficient retirement benefits to its members? How has it changed over time? In order to answer these questions, this paper begins by outlining a framework for determining whether a given plan’s retirement benefits are “adequate” or not, and then examines whether New York City’s TRS plans meet that test. Based on this comparison, it finds that the current Tier VI plan does not provide fully adequate retirement benefits even to the longest-serving veterans. Some portion of teachers will reach at least a minimal adequacy threshold, but the typical teacher would need to serve 23 years before doing so.

We analyze the effect of direct labour representation in supervisory boards on the risk of corporate pension plans.We exploit employee representation requirements mandated by German labour law and find that firms with parity employee representation reduce pension plan risk both in terms of funding as well as in terms of investment risk.

Retirement systems across the world are undergoing major reforms to adapt to continuously changing economic and demographic factors. Among these major changes are the so-called notional defined contribution pension schemes (NDCs), first developed about 20 years ago in countries such as Italy, Latvia, Poland and Sweden. These pension schemes attempt to reproduce the logic of a financial defined contribution pension plan within a pay-as-you-go framework. Among the countries with NDCs, Sweden is the only one where an automatic balancing mechanism goes hand in hand with the prior calculation of a financial solvency indicator that emerges from an actuarial balance sheet. This chapter describes the Swedish pension experience over the 2007–2015 period through its accounting method, together with the problems faced by the system and the policy responses.

Combining traditional Liability Driven Investment (LDI) with funded status responsive de-risking strategies involves inconsistent treatment of risks in these two elements of what has become a popular pension strategy. This inconsistency causes irreconcilable conflicts in their execution and imperils the positive pension fund outcome. This article provides a critique of the combined LDI/De-risking Glide Path strategy as currently implemented by many pension plan managers and also provides an example of an alternative solution that improves pension plan outcomes. Our prescription for the pension de-risking glide path approach differs from conventional wisdom, resulting in faster de-risking, without undesirable market betas that are unrelated to the liability. It also avoids illiquid assets that pension funds often gravitate toward in their quest for returns, takes fewer credit risks, and seeks more alpha risks.

Defined-benefit pension plans were in a worse state than previously reported due to managements' ability to manage the assumptions, according to our study. This empirical paper examined whether managers would have used unreasonable discount rates and assumed rates of return for their pension obligation and assets in order to improve their financial position. We found companies were 4 times more likely to have used an unreasonable discount rate thereby reporting a better funding status than was warranted. We also found, companies were 34 times more likely to have used an unreasonable rate of return for calculating pension expense thereby increasing net income. This paper has implications for employees who have a defined-benefit pension plan; employers who want to be attractive to future employees; and governments that provide retirement supplements for their citizens.

People who engage with their retirement savings are more likely to opt out of unsuitable defaults. We use cluster analysis of matched survey and administrative data to identify groups of pension plan members that are alike in their attitudes toward retirement saving. We find that engaged and disengaged members segregate into groups based on their interest and trust. Group membership in turn helps predict plan engagement, as proxied by nondefault choices. Specifically, engagement is stronger among interested groups. Trust, however, has a more complex relationship with engagement, particularly as it interacts with interest. While members with low interest and high trust are less likely to engage (e.g., by not checking plan performance), less trusting members engage more (e.g., by actively choosing asset allocations). As interest and trust successfully determine group membership, and ultimately engagement, pension plan providers should address members' diverse needs and circumstances with personalized approaches.

We use simulation methods and a detailed tax calculator to analyze the likely effects of two recent proposals aimed at reforming the Quebec Pension Plan (QPP): the federal proposal, eventually implemented throughout Canada, and the Quebec government's December 2016 proposal. Accounting for education-adjusted life expectancy, earnings variability over the course of a career, and their interactions with the tax code and retirement income system, we find that internal rates of return (IRRs) for new QPP contributions are similar under both reforms for individuals with lifetime average annual earnings of more than $40,000. Both reforms yield substantial IRRs for low-income individuals. Although the Quebec proposal offers higher IRRs for individuals earning less than $40,000, the federal proposal yields greater present value benefits for these same individuals. We show that if new QPP benefits were exempted from the Guaranteed Income Supplement (GIS) clawback, and provided that the working income tax benefit and GIS were not enhanced, the two reforms would yield similar IRRs for individuals with average earnings of more than $15,000. The QPP reform would thus better focus on the middle-income earners originally targeted by reform advocates.

Objective of the study was to explore how much Pekalongan residents understand and need Syaria insurance in Indonesia. The data collection methods were questionnaire and interview. The questionnaires were distributed randomly to 136 samples/ respondents. The interview was conducted to 10 informants in order to elaborate meaning, respondent’s understanding need and response on syaria insurance. The data analysis method was descriptive-qualitative analysis. The findings showed that most respondents had good level of understanding on syaria insurance. Some respondents stated that insurance was “important” while some others stated that it was “very important.” The respondents considered syaria insurance as investment, financial solution, financial security, business requirement, pension plan and future investment. However, the respondents had very basic understanding on syaria insurance. They associated syaria insurance with Islamic-based insurance and non usury (excessive interest). It implied that there is a market for syaria insurance in this city. It is expected that government and companies support development of syaria insurance in Indonesia.

SYNOPSIS We contribute to the literature examining defined benefit pension plan asset allocation in the post-SFAS 132(R) reporting environment. SFAS 132(R) requires firms to disclose the expected annual pension benefit payments, thus providing a direct way to measure pension plan payout horizon. Controlling for previously documented determinants of pension asset allocation, we find evidence that a payout horizon measure constructed from SFAS 132(R) disclosures is associated with the firm's pension investment decisions. Specifically, we document that firms with a greater proportion of pension obligations due in the short horizon allocate a smaller portion of their plan assets to equity investments. Additionally, we provide evidence that our proposed measure explains asset allocation over and above previously used proxies representing plan horizon, confirming the usefulness of the 132(R) mandated disclosures.

The individual account pension plan will soon recognize those beneficiaries about to receive their pension under this scheme. The 1997 Social Security Law has incorporated strict requirements to the pension plan; therefore, the possibility to obtain a retirement through an individual account is complicated for the employee. The pension will not necessarily guarantee the quality of life given that the retirement funds have been accumulated based on contribution rates and voluntary savings but not on the monthly average of the contribution base wage, which are funds affected by negative yields. The objective of this study is to analyze the AFORES classification SB2 and the performance invested in the SIEFORES to quantify the value of the pension. It applies the hemerographic-legislative technique in the model of the guaranteeism and the principle of the minimum vital in the framework of the human rights, and a quantitative study of time series. It is concluded that individual account system pensions will not guarantee the quality of life of individual account holders.

Using a large proprietary database of transaction-level institutional trades for the 1997–2011 period, we find that institutional investors are net sellers in dividend reduction firms during the two quarters prior to the announcements. They also trade more intensively in firms that do not prepare the market for dividend cuts or that have greater information asymmetry. Trading by both pension plan sponsors and money managers affects the market's reaction to the dividend reduction announcements. Finally, all institutional investors earn significant profits by trading in the two quarters prior to the announcements, and money managers outperform pension plan sponsors.

Public school teachers deserve a compensation system that puts them on a secure path toward retirement. The severely backloaded structure of today’s public school teacher pension systems benefit only a small proportion of entering teachers while putting the rest on an insecure retirement path. But there is a cost-neutral solution to this problem that would benefit most teachers entering public school classrooms today without removing any of the protections from the stock market with which teachers have become accustomed. Teacher pensions could be restructured so that teachers earn retirement wealth in relatively equal intervals throughout their careers. The author calls these Smooth Accrual Defined Benefit plans.

Pension plan sponsors often manage their portfolios via multiple management companies. We find that some plans receive systematically better prices when management companies trade the same stock, on the same day, in the same direction for multiple clients. The number of management companies per client is an important predictor of being a favored or disfavored client, consistent with competition over clients. Average magnitudes of transfers across clients are as large as 0.50% of dollar trade volume. We find that these transfers are larger when opportunities are greater, when clients are newer, and around year-end when client attention is high. Moreover, clients who benefit reward management companies with as much as a 50% increase in future dollar trading volume. We rule out alternative explanations such as market timing skill, directed brokerage arrangements and different trading practices. We interpret the collective results as evidence of conflicts of interest.

Prior studies have documented that pension plan sponsors often monitor a fund’s performance relative to a benchmark. We use a first-difference approach to show that in an effort to beat benchmarks, fund managers controlling large pension assets tend to increase their exposure to high-beta stocks, while aiming to maintain tracking errors around the benchmark. The findings support theoretical conjectures that benchmarking can lead managers to tilt their portfolio toward high-beta stocks and away from low-beta stocks, which can reinforce observed pricing anomalies.Received March 20, 2014; editorial decision October 25, 2016 by Editor Laura Starks.

The basic pension plan for urban enterprise workers (PPUEW) is the primary form of public pension system in China and is managed by provincial governments. Although the federal government requires that employers contribute 20% and individuals 8%, provincial governments have the right to adjust the rate. As different rates apply in different provinces, this study assesses the effect of rates on enterprises' incentive to participate in the PPUEW, using data from the 2011 China Annual Survey of Industrial Firms. As rates increase, employers and employees pay more; however, once the contribution ratio reaches a tipping point, they try to reduce deductibles. The findings suggest that a lower contribution rate motivates enterprises to participate in the PPUEW and boosts the fund's revenue.

Chief executive officer (CEO) retirement pension plans are known as sustainable compensation because they induce managers to make more sustainable and long-term-oriented corporate decisions. We focused on the role of institutional investors in awarding CEO pension plans. Long-term and short-term institutional investors are expected to increase and decrease the CEO pension plan, respectively, wherein the former is aimed at persuading the manager to focus more on the firm&rsquo, s long-term performance and the latter is aimed at making the CEO assume more risk. We empirically tested our hypothesis and found significantly negative (positive) relationship between short-term (long-term) institutional ownership and CEO pension plans, which is consistent with our hypothesis. Our results suggest the institutional ownership horizon&rsquo, s differing impact on managers&rsquo, sustainable compensation structure.

This study examines the impact of the adoption automatic enrollment provisions by the state of South Dakota for its supplemental retirement saving plan (SRP). In South Dakota, state and local government employees, including teachers, are also covered by a defined benefit pension plan and by Social Security. Thus, career public employees in South Dakota can expect a life time annuity from these two programs of around 75 percent of their final salary. Prior to the introduction of automatic enrollment, the proportion of newly hired employees who were contributing to the SRP was less than three percent in their first year of employment. After the introduction of automatic enrollment, over 90 percent of newly hired workers who were auto enrolled were participating in the plan. Significant differences compared to earlier studies of auto enrollment include: we are examining public employees who are also covered by a defined benefit retirement plan, prior to the introduction of auto enroll participation were extremely low, and these is no employer match to employee contributions to the SRP. Thus, the key question is whether auto enrollment has the same powerful impact on contributions to a retirement saving plan under these conditions.

This study examines the impact of the adoption of automatic enrollment provisions by schools and universities in the state of South Dakota for its supplemental retirement saving plan (SRP). In South Dakota, educational personnel are also covered by a defined benefit pension plan and by Social Security. Thus, career public employees in South Dakota can expect a life time annuity from these two programs of around 75 percent of their final salary. Prior to the introduction of automatic enrollment, the proportion of newly hired educators who were contributing to the SRP was less than two percent in their first year of employment. After the introduction of automatic enrollment, over 90 percent of newly hired workers who were auto enrolled were participating in the plan. Thus, auto enrollment is shown to have the same powerful impact on contributions to a retirement saving plan for educational employees even when they also can expect life annuities from a defined benefit pension plan.

The Canadian Medical Association (CMA) cannot use the proceeds from its sale of MD Financial Management to set up a pension plan for its members, despite calls for such a move from some Canadian doctors. The lack of an employer–employee relationship means there is no legal basis for a pension plan

Trust is an essential component of the financial system, and distrust can undermine saving and economic growth. Accordingly, prior research has shown that survey responses to a question about ‘trust in people’ are associated with household willingness to invest in the stock market. Nevertheless, little is known about how trust shapes economic behaviors predictive of retirement preparedness. Our study draws on the Singapore Life Panel (SLP®), a high-frequency internet survey of people age 50-70, to assess how trust ties to older respondents’ (1) pension plan participation and withdrawals; (2) life, health and long-term care insurance purchases; and (3) stock market engagement. We show that the ‘trust in people’ question often used in prior studies is uncorrelated with household behaviors related to retirement preparedness. Nevertheless, trust in financial and public-sector representatives is positively associated with pension savings, investments, and insurance purchases. Financial literacy also has a consistent and important role in explaining who saves for retirement and other economic behaviors driving retirement readiness.

We analyze the investment menus offered within 401(k) pension plans to the employees of the largest finance and non-finance firms. Within the sample of finance firms, we distinguish between finance firms that hire an external independent trustee and finance firms that serve also as a trustee of their own pension plan. We find that employees of finance firms with an external trustee invest less in sponsor equity and options affiliated with the trustee as compared to those of non-finance firms and of finance firms with an internal trustee. The changes of mutual funds on the investment menu offered by finance firms with an independent trustee are also more sensitive to past performance and their plan participants benefit from the removal of underperforming mutual funds. These findings suggest that greater financial sophistication among plan participants and the sponsoring company can improve the quality 401(k) menus, but only when it is accompanied with an independent governance structure.

In the never-ending debate about finding an optimal pension model, many proponents start the discussion at extreme ends of the pension model paradigm. At one extreme is a traditional, fully guaranteed defined-benefit (DB) pension plan. In this plan, all of the risks are born by the plan sponsor given that plans are fully funded. While such plans are growing rare today that is the starting point for many in this debate. At the other extreme is a traditional defined-contribution (DC) plan. In this plan, all of the risks are borne by the worker participant. This, again, is a starting point for many in the pension model debate. Many classic DB and classic DC pension plans have not achieved their goals. This paper argues they should be replaced by pension plans that facilitate sharing of risks among all willing stakeholders, whether the plan is characterized as DB or DC. This paper proposes, as a starting point for all pension-plan model discussions, a “Common Ground.” If one is of a pro-DB persuasion, then the Common Ground model would be a Pooled Target Benefit DB pension plan. If one is of the pro-DC persuasion, then the starting point will be a large Collective DC plan. These plans have a lot in common and, since they can provide equivalent benefits for the same contributions, they should be viewed as being actuarially equivalent. Thus, by finding the common ground in the Great Pension Debate, we have also identified models for pensions that can provide all Canadian workers with significant retirement income security. With that accomplished, the question becomes whether one wants a bit more of a DB flavour and why or whether one wants a bit more of a DC flavour and why. This should make arriving at a consensus plan model much easier for all. We conclude that policies encouraging larger collective, pooled pension plans governed by independent management boards are very much needed to better serve Canadians. Such solutions are common in the public sector but need to be encouraged in the private sector.

Board knowledge is a key component to successful investing. The extent of mandated trustee training on investments varies across public plans, endowments, and trusts. In our pension plan study, we found that the most effective organizations had high participation rates among both the audit and investment committees. To be effective, those organizations needed members who demonstrated both engagement and an adequate base of financial literacy.

Expanding private pension plans coverage is seen as an alternative to address the growing pension gap. Indeed, due to recent reforms, lower public pension system replacement rates are expected for future generations of retirees. However, in most countries, private provision remains voluntary and the coverage rates observed are still very low. Several factors might explain this evidence and several policy options have been suggested to increase coverage in private pension plans. Yet, the issues concerning both the decision of the occupational pension plan type, defined benefit or defined contribution, and the characteristics of the personal pension plans, are most important and complex, as the implications for attaining the expected retirement income adequacy are diverse. This paper reviews these issues and the coverage of these pension plans.