Funded and private pensions

OECD Seminar on the Payout Phase of Pensions, Annuities and Financial Markets: 12 November 2008, Paris, France

 

Representatives from OECD governments, academia and private sector met during a seminar on “the payout phase of pensions, annuities and financial markets” to discuss proposals to support private pension systems, and in particular improve the management of risks in the retirement stage of individual account (defined contributiSummary on, DC) pension systems. The seminar discussed the impact of the financial crisis, as well as longer term issues affecting the sector such as increasing life expectancy.
Private pensions have been severely affected by the financial crisis, with pension fund returns falling by over 20% on average across the OECD between January and October this year, or a loss of over USD 4 trillion in pension assets.


Both defined benefit and defined contribution systems have been badly affected. In DC pension systems, negative returns translate directly into a smaller pension pot. While young workers have a long period to make up these losses, for individuals close to retirement who expect or are required to buy an annuity with their savings these declines in asset values can represent an irremediable decline in living standards in old age. In DB systems, the main worry is the decline in funding levels (5-15 percentage point decline, depending on the discount rate used), with worse data likely to be reported at year end.
From a financial stability standpoint, one major concern is that pension funds in some countries are reacting by selling part of their equity portfolios, putting further downward pressure on equity prices. Fair valuation methods and quantitative risk-based valuation seem to be partly responsible for this pro-cyclical behaviour.

 

Documentation

 

Agenda.

Discussion documents

Payout Phase, Annuities and Financial Markets.

Challenges for Financial Intermediaries Offering Decumulation Products.

Revisiting the Asset-Meltdown Hypothesis.

Policy Options for the Payout Phase.

Forms of Benefit Payment at Retirement.

National Annuity Markets: Features and Implications.

Longevity Bonds: A Financial Market Instrument to Manage Longevity Risk.

Governments and the Market for Longevity-Indexed Bonds.

Background Document

Retirement Saving and the Payout Phase: How to get there and how to get the most out of it; Mr. Ignazio Visco, Banca d’Italia.

Presentations

Ageing, the Payout Phase and Financial Markets; Mr. E Philip Davis, Brunel University and NIESR London.

Retirement Saving and the Payout Phase: How to get there and how to get the most out of it; Mr. Ignazio Visco, Banca d’Italia.

The Payout Phase of Pensions: Annuities and implications for financial markets; Mr. Helmut Ettl, FMA - Finanzmarktauficht.

Roundtable on the Payout Phase and Retirement Income; Mr. David Tuesta, BBVA.

Longevity Risk Hedging:The role of the private & public sectors; Mr. David Blake Pensions Institute, Cass Business School.

Ultra Long Term Financial Instruments; Mr. Jens Thomsen, Danmarks Nationalbank.

Pensions and the Current Crisis; OECD Secretariat

Payout Phase of Pensions, Annuities and Financial Markets; OECD Secretariat

Summary Record

Summary Record

 

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