This paper examines the relationship between funding risk of defined benefit pension plans and both corporate debt ratings and equity risk measures for FTSE100 companies. Panel based models highlighted a direct relationship between pension plan risk and equity risk. Pension risk was also demonstrated to be factored into credit ratings with the analysis highlighting that the greater the pension risk, the greater the probability of obtaining a lower debt rating. From a rating agency viewpoint, this is positive news, particularly at present when agencies are being criticized for a perceived failure to reflect sub-prime mortgage problems in firm-specific ratings.

This paper examines the impact of the Senior Citizens Freedom to Work Act of 2000, which abolished the Social Security retirement earnings test for those aged 65–69, on the labor supply of older men using data from the 1996–2004 waves of the Health and Retirement Study (HRS). We use the fine structure of the 2000 Act to develop a new measure of exposure to the earnings test that varies across calendar years both by month and year of birth. We find that much, if not all, of the labor-supply response occurred for sub-groups of men who, either because of high mortality risk, high rates of pure time preference, or liquidity constraints, may have found the actuarial adjustment built into the earnings test relatively disadvantageous, particularly the lesser educated.

This paper estimates the risks of financial distress in UK universities, and uses these estimates to examine the basis of the annual levies paid to the UK's Pension Protection Fund by the Universities Superannuation Scheme, a multi-employer scheme covering 391 universities and related institutions. The paper compares the payments between the two alternative participating arrangements for multi-employer pension schemes to the PPF, namely last-man-standing and segmented levies. Using an Ohlson (1980) logit model to predict the financial distress risk for HE institutions, we find that financially distressed institutions are smaller, with higher leverage and lower earnings. By comparing the implied financial distress probabilities from the PPF risk-based levy using USS accounts with the simulated probabilities using our logit model, we estimate whether USS levies are fairly priced. Our estimates suggest that in 2006/07 USS member institutions appeared to be paying less than the fair risk-based levy. However, this is because during the initial phase of the PPF the risk-based levies were much lower as a proportion of the total levy than the intended steady-state values. The implication is that if USS had paid the same total levy but where the risk-based component was four fifths of the total, then USS would have been paying substantially more than its fair risk-based levy. In addition, by looking at the distributions of individual university risk-based levies under a segmented PPF arrangement, we find evidence of significant cross-subsidies under the current last-man-standing levy between participating USS institutions.

Economic and demographic slowdown has put under strain public pension systems around the globe. In this paper, we discuss the characteristics of the Greek social security system and investigate the issue of pension fund management. Our empirical analysis focuses on whether flexible investment rules (including equity investment) could have taken the pressure off the Greek public pension system while reducing the risks associated with such flexibility. The empirical results of the paper suggest that efficient management of reserves can result in additional significant revenues at acceptable levels of financial risk. However, pension fund management flexibility cannot by itself resolve the problem of social security system.

After 2000, the vast majority of defined benefit (DB) pension plans encountered a decrease in their funding ratios, largely due to a drop in asset prices. It is possible that public sector pension plans may have acted imprudently by chasing returns, once they encountered underfunding. We identify four indicators for DB plans' imprudent investment behavior: no portfolio rebalancing, employer conflicts of interest, trustee conflicts of interest, and failure to implement best investment practices. To see if public sector pension plans rebalance their portfolios, we use data from the Federal Reserve's Flow of Funds, dating from 1952 to 2007. To test for the remaining three hypotheses, we use data from the Census' State and Local Government Employee Retirement Systems data base, where consistent data for state and local government plans are available from 1993 to 2005. Our results suggest that there is no evidence that public sector plans systematically engaged in imprudent investment behavior and that this did not systematically differ after 2000 from the earlier period.