What Should Be Done About The Underfunding of Defined Benefit Pension Schemes?

John Cotter, David Blake and Kevin Dowd
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Kevin Dowd: University of Notingham

Working Papers from Geary Institute, University College Dublin

Abstract: Underfunding of defined benefit (DB) pension schemes is prevalent throughout the Western world, and no more so than Ireland. This paper examines underfunding of DB schemes and discusses alternative ways of overcoming this problem. It critically reviews alternative government sponsored insurance schemes including the US Pension Benefit Guaranty Corporation (PBGC) and the UK Pension Protection Fund (PPF), underpined by the introduction of risk-based levies. Commentators have suggested introducing some variant of the latter scheme in Ireland. The paper also examines alternative schemes that have been proposed to understand the dynamics of the level of underfunding and how this can be addessed. Finally it examines the risks inherent in DB schemes and details how these will affect the introduction of any mechanism that tries to address the levels of underfunding in Ireland.

Keywords: defined benefit; pension schemes; underfunding (search for similar items in EconPapers)
JEL-codes: H21 I12 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2012-01-26
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:201202

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