GLOBAL - As fewer corporate sponsors guarantee pensions, employees are becoming less dependent and conflict of interest is reduced, Lans Bovenberg, director at the Dutch pension research institute Netspar, has suggested.
In an article entitled Pension funds as investors, Bovenberg and Italian economics professor Tito Boeri state they "welcome" the increasing replacement of corporate sponsor-guaranteed pension schemes with stand-alone pension funds where participants share the risk.
"Workers should become less dependent on the firm they work for and companies do not want to become an insurance outfit in which pension-related risks dominate the risks associated with their core business", the authors noted.
They also suggest stand-alone pension funds "can focus on serving the interests of the participants alone, thereby avoiding conflicts of interest".
However, Bovenberg and Boeri stress the importance of informing the participants in the scheme about the risks they take. They view hybrid DB/DC plans as the best option and suggest "minimum harmonized standards for reporting on pension rights" following the Swedish example of the "orange envelope" in which pension scheme participants are told how their fund is doing on an annual basis.
This latest article is posted on a new forum for economic research papers. Created by the Centre for Economic Policy Research (CEPR), the Vox (www.voxEU.org) site aims to be a platform for researchers in various fields of economics and finance.
It will also act as a link to similar forums in other languages such as the French Telos or the Italian Lavoce. Spanish, German and Dutch portals will follow over the coming weeks.
Vox will mainly feature articles from CEPR's network of 750 economists based primarily in European universities and central banks.