Shaping Private Pensions: Analyzing the Link Between Social Security and Retirement Adequacy
24 Pages Posted: 23 Jun 2009
Date Written: May 2009
Public pension schemes are most often discussed from a social welfare and public policy point of view. Nevertheless, the design of public pensions should also be taken into close consideration by companies planning and designing private pension plans for their employees. Social security and private pensions are both very important parts of retirement resources for the vast majority of the population and the adequacy of these resources thus depends not only on the generosity of social security but also on the financial commitment employers choose to make to private arrangements.
In this sense, private pensions come to complement social security benefits and, in many cases, they are either explicitly or implicitly integrated with public provision. In many countries, private pension designers consider projected social security benefits and contributions when defining their overall benefit strategy. It is vital, nevertheless, that more employers take into account the specificities of first pillar pensions in each country so as to develop benefit packages that complement social security benefits effectively.
Accordingly, in the following paper we will examine and analyze social security systems across eight developed nations (Canada, France, Germany, Italy, Japan, Netherlands, UK and US). We have based our comparison on three key aspects: the generosity of state benefits; whether the focus rests on the insurance or redistributive role of social security; and the long term sustainability of public pensions. We will show that the way in which these aspects are defined and interact have different implications in terms of how companies plan and design the retirement benefits offered to employees.
Keywords: Social Security, State Benefits, Public Pension Schemes, Pension Design
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