Pensions are benefit contracts that replace a person’s earnings after she reaches old age and retires from the labour force. Pension systems vary widely across countries, but everywhere the government’s role is to provide a minimum through a mix of cash and medical benefits. Governments often provide tax incentives for employers and unions to sponsor occupational pension plans that complement the government-run system. The nature of the pension benefits promised and the assets that back them have profound effects on social welfare, on the development of a country’s domestic asset markets, and on the global financial system.
KeywordsAdverse selection Annuities Defined-benefit pension plans Defined-contribution pension plans Equipment trusts Free-rider problem Funding of pensions Informational inefficiencies Life-cycle saving model Longevity insurance Moral hazard Occupational pensions Pay-as-you-go pension plans Pensions Retirement Risk sharing Social Security (USA)
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