Selected Pension Scheme Topics

Abstract

This chapter goes into greater depth on a range of topics. Two fundamental questions relate to why employers choose to offer pension schemes and why they have switched to offer defined contribution (DC), rather than defined benefit (DB), schemes. After considering these two questions, this chapter analyses the problems with DC schemes, which this switch to the widespread use of these schemes will amplify. Next this chapter looks at ways the sponsors of DB schemes can shed responsibility for their DB schemes, and ways they can deal with rising longevity. This is followed by details of national insurance schemes to protect the members of DB schemes in the event of sponsor default. As well as DB and DC schemes, many other pension scheme designs are possible, and some of the alternatives are presented. This leads on to a consideration of the widespread use of uniform contribution and accrual rates, and the redistributive effects of pension schemes. Economies of scale are an important feature of pension schemes, and after analysing their nature there is a description of the pension system in a major emerging economy – China.