Implicit debt in public sector plans

An international comparison

E.H.M. Ponds, C. Severinson, J. Yermo

Research output: Contribution to journalArticleScientificpeer-review

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Abstract

Most countries have separate pension plans for public-sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may hide potentially huge fiscal liabilities to be passed on to future generations of workers. In order to arrive at a fair comparison between countries regarding the fiscal burden of their public-sector pension plans, this article recommends that unfunded pension liabilities should be measured and reported according to a standard approach for reasons of fiscal transparency and better policymaking. From a sample of Member countries of the Organisation for Economic Co-operation and Development, the size of the net unfunded liabilities as of the end of 2008 is estimated in fair value terms. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms.
Original languageEnglish
Pages (from-to)75-101
JournalInternational Social Security Review
Volume65
Issue number2
DOIs
Publication statusPublished - 2012

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international comparison
pension
indebtedness
public sector
liability
transparency
pay-as-you-go
pension fund
government revenue
OECD
Values
employer
employee
Fiscal
Debt
International comparison
Public sector
worker
lack
Liability

Cite this

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abstract = "Most countries have separate pension plans for public-sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may hide potentially huge fiscal liabilities to be passed on to future generations of workers. In order to arrive at a fair comparison between countries regarding the fiscal burden of their public-sector pension plans, this article recommends that unfunded pension liabilities should be measured and reported according to a standard approach for reasons of fiscal transparency and better policymaking. From a sample of Member countries of the Organisation for Economic Co-operation and Development, the size of the net unfunded liabilities as of the end of 2008 is estimated in fair value terms. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms.",
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Implicit debt in public sector plans : An international comparison. / Ponds, E.H.M.; Severinson, C.; Yermo, J.

In: International Social Security Review, Vol. 65, No. 2, 2012, p. 75-101.

Research output: Contribution to journalArticleScientificpeer-review

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