Securing Employer-Based Pensions: An International Perspective.

Interest in the security of pension plans has heightened as the population of the world ages and overstressed budgets undermine governments, ability to maintain retirement income programs. Securing Employer-Based Pensions is a collection of papers and commentaries that seeks to help policymakers analyze retirement income structures of both developed a nd developing nations. Earlier versions of these papers were presented at a conference sponsored by the U.S. Department of Labor, the World Bank, and the Pension Research Council of the Wharton School.

The book is divided into three sections. The first set of papers discusses the retirement income practices in developed nations. They focus on the evolution of these systems in the United Kingdom, Germany, and Japan, as well as the role of multinational corporations and cross-border issues arising from the integration of Europe. The two papers in the second section show how the retirement policies of emerging economies share many of the concerns of developed nations. The first reviews the variety of mandated savings schemes that have evolved in Asia and Africa, and recent developments in Chile. The second identifies issues that have emerged in central and eastern European countries. The final section deals with regulatory concerns and policies such as: (1) taxation of pension contributions and benefits, (2) regulation of pension financing, and (3) pension insurance.

Retirement income systems were described through the often-used metaphor of a "three-legged stool." The first leg is government-provided pension and welfare support for the aged; the second is employer- or labor union-provided pensions; and the third is individual and family support. The papers provide clear, cogent reviews of the diverse retirement systems and illustrate the substantial variation in the mix of the three sources of retirement income across the world. Generally, in those countries where the government provides more retirement income, the proportion of the labor force covered by employer pension plans decreases. The role of the government ranges from subsidizing a "safety-net" of a minimum level of monetary support to financing the main source of retirement income. Some plans are geared to replace the income of only low-paid workers, while others provide increasing benefits to middle-and high-income workers. There are also widely differing practices on the extent of government oversight and the use of other means to protect the security of employer pension plans.

The cross-national experiences described in this volume are offered to policymakers trying to answer the question: What form of government regulation of employer-provided pensions is desirable? While these papers provide insights into the diverse practices of the pension plans in some developed and developing countries, the arguments calling for government oversight are not compelling. The reasoning or methodology used in the selection of countries is not apparent. It is not clear why the specific countries were singled out for detailed analysis while others were not.

Furthermore, as noted by some of the discussants, an evaluation of the need for government intervention should be made in the context of the cultural mores of the area. The decision to provide government protection for pensions is politically motivated and reflects these cultural biases and practices. For example, the argument that the government must intervene to limit risk is less pressing in those countries where employer-provided pensions account for a minor portion of retirement income or if there are other mechanisms to ensure the prudent investment of pension funds.

The retirement income practices of other countries are based on ideas and customs that may be foreign to one's own environment. What is acceptable in one country may be considered unacceptable in another. Thus, although the mechanisms for administering pensions differ, this is not a sufficient reason to judge them to be improper or deficient. Absent an understanding of the political and cultural norms in which the retirement income programs operate, this review of retirement systems around the world is of limited value to policymakers in deciding the appropriate level of government intervention. Nevertheless, it provides information on the workings of pension systems that may be useful to those involved in multinational firms or anyone interested in alternative retirement systems.