What Should Be Done About the Underfunding of Defined Benefit Pension Schemes? A Case Study of Ireland

42 Pages Posted: 4 Mar 2014

See all articles by John Cotter

John Cotter

University College Dublin; UCLA Anderson School of Management

David P. Blake

City University London - Cass Business School

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: September 2012

Abstract

Defined Benefit (DB) pension schemes have prevalence in certain countries, most notably the UK. This is also the case for Ireland. Underfunding of DB pension schemes is prevalent throughout the Western world, and no more so than Ireland. This paper examines underfunding of DB schemes in Ireland 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), underpinned 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 addressed. 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, Funding, Government Insurance Schemes

JEL Classification: G11, G18, G23, G28

Suggested Citation

Cotter, John and Blake, David P. and Dowd, Kevin, What Should Be Done About the Underfunding of Defined Benefit Pension Schemes? A Case Study of Ireland (September 2012). Available at SSRN: https://ssrn.com/abstract=2403242 or http://dx.doi.org/10.2139/ssrn.2403242

John Cotter (Contact Author)

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

David P. Blake

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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