Proving Incentives for Long-Term Investment by Pension Funds : The Use of Outcome-based Benchmarks
A fundamental goal of any pension system is to ensure that members receive an adequate income when they retire. Although traditional defined benefit pension plans set out how pension income will be determined in advance and then strive to deliver t...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/05/19548017/proving-incentives-long-term-investment-pension-funds-use-outcome-based-benchmarks-proving-incentives-long-term-investment-pension-funds-use-outcome-based-benchmarks http://hdl.handle.net/10986/18800 |
| Summary: | A fundamental goal of any pension system
is to ensure that members receive an adequate income when
they retire. Although traditional defined benefit pension
plans set out how pension income will be determined in
advance and then strive to deliver this, the growing number
of defined contribution plans accumulate a sum of assets
which can then be turned into a pension income on
retirement. However, the amount of this retirement income is
not predefined This frequently leads to a focus by not only
most pension providers, but also regulators and pension plan
members themselves on the short-term accumulation of pension
assets rather than the longer-term goal of securing an
adequate retirement income. This paper discusses a possible
solution to this challenge: the use of benchmarks to
encourage pension funds to invest with the longer-term goal
of delivering adequate retirement income in mind. Examples
are provided of leading pension funds that already work with
long-term, outcome-based benchmarks. The paper suggests a
methodology for pension regulators to use in order to
incentivize pension funds in their jurisdictions to adopt a
similar approach. |
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