Pension Risk and Risk Based Supervision in Defined Contribution Pension Funds

The main goal of any pension system is to ensure that members receive an adequate pension income when they retire. Whilst traditional defined benefit (DB) pension plans set out what that pension income will be in advance and then strive to deliver it, the growing number of defined contribution (DC) plans accumulates a sum of assets which can then be turned into a pension income on retirement. However, the amount of this retirement income is not set in advance. In the absence of a proper regulatory framework, feature n DC plans leads to a focus by not only 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. The paper is organized as follows: chapter two discusses the origins of risks based supervision and discusses the role of capital in the alignment of incentives in financial institutions. Chapter three discusses the concept of risk based supervision for pension funds, and its limitations in the case of DC pension schemes. Chapter four discusses the effectiveness of RBS schemes in DC systems in emerging economies, and the last section provides some lessons learned.

Bibliographic Details

Main Authors:	Randle, Tony, Rudolph, Heinz P.
Language:	English en_US
Published:	World Bank, Washington, DC 2014-03-18
Subjects:	ACCESS TO CAPITAL, ACCOUNTING, ANNUAL RETURNS, ASSET ALLOCATION, ASSET ALLOCATIONS, ASSET CLASS, ASSET MANAGEMENT, ASSET MANAGERS, AVERAGE INTEREST, AVERAGE INTEREST RATE, BANK DEPOSITS, BANK POLICY, BANKING INDUSTRY, BANKS, BASIS POINTS, BOND RATES, BONDS, BOOK ENTRY, CAPITAL ADEQUACY, CAPITAL MARKET, CAPITAL MARKETS, CAPITAL REQUIREMENT, CAPITAL REQUIREMENTS, CENTRAL BANK, CENTRAL DEPOSITORY, CONSERVATIVE INVESTMENT, CONTRIBUTION, CONTRIBUTION RATE, CONTRIBUTION SCHEMES, CONTRIBUTION SYSTEMS, CONTRIBUTIONS, CORPORATE GOVERNANCE, CREDITORS, CUSTODIAN BANK, DEFINED BENEFIT PENSION, DEFINED CONTRIBUTION PENSION, DEFINED CONTRIBUTION PENSIONS, DEPOSIT, DERIVATIVE, DERIVATIVE INSTRUMENTS, DERIVATIVE PRODUCTS, DERIVATIVES, EARNINGS, ELIGIBLE INSTRUMENTS, EMERGING ECONOMIES, EMERGING MARKETS, EQUITIES, EQUITY INSTRUMENTS, EQUITY MARKETS, FINANCIAL EDUCATION, FINANCIAL GROUPS, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL LITERACY, FINANCIAL PERFORMANCE, FINANCIAL SECTOR, FINANCIAL STATEMENTS, FIXED INCOME, FIXED INCOME PORTFOLIO, FRAUD, FUND MANAGEMENT, FUND MANAGERS, FUTURE VALUE, GOVERNMENT BOND, GOVERNMENT BONDS, GOVERNMENT GUARANTEES, GOVERNMENT SECURITIES, HOLDING, INCOME INSTRUMENTS, INFLATION, INFLATION LINKED BONDS, INFLATION RATE, INFORMATION SYSTEMS, INSURANCE, INSURANCE COMPANIES, INSURANCE PRODUCTS, INTEREST RATE, INTEREST RATE RISK, INTEREST RATES, INTERNAL AUDITS, INVESTING, INVESTMENT ALTERNATIVES, INVESTMENT COMPANIES, INVESTMENT COMPANY, INVESTMENT DECISIONS, INVESTMENT MANAGEMENT, INVESTMENT PERFORMANCE, INVESTMENT PROCESS, INVESTMENT REGULATION, INVESTMENT REGULATIONS, INVESTMENT RESTRICTIONS, INVESTMENT RETURNS, INVESTMENT RISK, INVESTMENT RISKS, INVESTMENT STRATEGIES, INVESTMENT STRATEGY, LABOR FORCE, LEGAL FRAMEWORK, LEVEL OF CONTRIBUTIONS, LIQUID ASSETS, LIQUIDITY, LIQUIDITY RISK, LONG-TERM GOAL, LONG-TERM INVESTORS, MANDATORY PENSION FUNDS, MARGIN REQUIREMENTS, MARK-TO-MARKET, MARKET DISCIPLINE, MARKET FAILURE, MARKET FAILURES, MARKET OVERSIGHT, MARKET PARTICIPANTS, MARKET PRACTICES, MARKET RISK, MARKET SURVEILLANCE, MATURITIES, MATURITY, MINIMUM CAPITAL REQUIREMENT, MONETARY POLICY, MUTUAL FUNDS, NOMINAL YIELD, PENSION, PENSION ASSET, PENSION ASSETS, PENSION AT RETIREMENT, PENSION BENEFITS, PENSION FUND, PENSION FUND ASSETS, PENSION FUND PERFORMANCE, PENSION FUNDS, PENSION INCOME, PENSION INCOMES, PENSION INVESTMENT, PENSION PLAN, PENSION PLANS, PENSION PROVIDERS, PENSION SCHEME, PENSION SCHEMES, PENSION SECTOR, PENSION SYSTEM, PENSION SYSTEMS, PENSIONERS, PENSIONS, PERFORMANCE MEASUREMENT, PORTFOLIO, PORTFOLIO ALLOCATION, PORTFOLIO ALLOCATIONS, PORTFOLIO CHOICE, PORTFOLIO PERFORMANCE, PORTFOLIOS, PORTFOLIOS OF PENSION FUNDS, PRIVATE PENSION, PRIVATE PENSION FUND, PRIVATE PENSIONS, PROBABILITY, PROTECTION OF INVESTORS, PRUDENTIAL REGULATION, PRUDENTIAL STANDARD, RATE OF INFLATION, RATE OF RETURN, RATES OF RETURN, RATES OF RETURNS, REGULATORY AUTHORITY, REGULATORY FRAMEWORK, REINVESTMENT, REINVESTMENT RISK, REPLACEMENT RATE, REPLACEMENT RATES, RESEARCH ASSISTANCE, RESERVE, RESERVE REQUIREMENT, RESERVE REQUIREMENTS, RESERVES, RETIREMENT, RETIREMENT AGE, RETIREMENT INCOME, RETURN, RETURNS, RISK ASSESSMENT, RISK BEHAVIOR, RISK MANAGEMENT, RISK MANAGEMENT SYSTEM, RISK MANAGEMENT SYSTEMS, RISK PROFILE, RISK PROFILES, SECURE PENSION, SECURE PENSIONS, SECURITIES TRANSACTIONS, SENIOR, SETTLEMENT, SHAREHOLDER, SHAREHOLDERS, SHORT-TERM INTEREST RATES, SOLVENCY, SUPERVISION OF PENSION FUNDS, SUPERVISORY AGENCIES, SUPERVISORY AGENCY, SUPERVISORY AUTHORITIES, SUPERVISORY AUTHORITY, TRADING, TRANSPARENCY, TREASURY, TREASURY RATES, TRUSTEES, TYPES OF INVESTMENTS, TYPES OF PENSION, USE OF DERIVATIVES, VALUABLE, VALUATION, VALUATIONS, VALUE OF CONTRIBUTIONS, VALUE OF PENSIONS, WAGE, YIELD CURVE, YIELD CURVES,
Online Access:	http://documents.worldbank.org/curated/en/2014/03/19330636/pension-risk-risk-based-supervision-defined-contribution-pension-funds-pension-risk-risk-based-supervision-defined-contribution-pension-funds https://hdl.handle.net/10986/17791
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