Abstract
Full or partial funding of traditional public pension schemes becomes crucial for the inter-temporal sustainability of the systems. A good governance structure for national public pension funds (NPPFs) may work as a deterrent for misuse of the assets of the fund, which are particularly exposed to abuse by governments. Our study provides the first global comprehensive survey on governance, transparency, assets, and investments of 83 NPPFs located in 68 countries. We develop and calculate a Transparency and Governance Index that measures compliance of NPPFs with best practices. Our results indicate a wide dispersion in governance and transparency performance of these funds, and provide the basic elements that governments should take into account when reforming NPPFs’ governance structures.
Highlights
Public pension regimes have traditionally been of the pay-as-you-go (PAYG) type, and the role of accumulated reserves has been overlooked
The need for the states to:a) keeping the promises embedded into the pension plans sponsored by governments; and b) assure that public finance will not be put into much stress due to the contingent liabilities that are being assumed in the present, have led countries to set up national public pension funds (NPPFs)
As it can be seen, in almost half the countries that were surveyed, NPPFs are very relevant within national economies, managing assets representing over 10% of their respective GDPs, while in many cases they exhibited an increase in their importance since 2001
Summary
Public pension regimes have traditionally been of the pay-as-you-go (PAYG) type, and the role of accumulated reserves has been overlooked. Pension funds management is mostly associated with private entities managing contributions of plan members This is very striking in light of the actual relevance that public pension reserves managed by governments play in a number of countries. Figures as of 2007, show that national public pension funds (NPPFs) managed assets globally by about USD 4.4 trillion equivalent. The authors find that governance of NPPFs affects performance only indirectly by determining key investment strategies; these strategies are associated in turn with higher performance. In such a context, the purpose of the paper is to present a survey of the actual governance and transparency practices at the NPPFs existing around the world.
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