An Update on Pension Obligation Bonds

Alicia Munnell, Jean-Pierre Aubry and Mark Cafarelli

State and Local Pension Plans Briefs from Center for Retirement Research

Abstract: The brief’s key findings are: The brief’s key findings are: *Some state and local governments issue Pension Obligation Bonds (POBs) to cover their required pension contributions. *POBs offer budget relief and potential cost savings, but also carry significant risk. *POBs had a negative average real return from 1992-2009, but show a small gain when the time period is extended to 2014. *POBs could be a useful tool for fiscally sound governments or as part of a broader pension reform package for fiscally stressed governments. *But results to date suggest that, instead, POBs tend to be issued by governments under financial pressure who have little control over the timing.

Pages: 12 pages
Date: 2014-07
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