Previous

Part - VI

Pension Funds: A Global Context

In the USA, there are different types of pension schemes in vogue under which there are public as well as private pension funds. The state authorities through their controllers (regulators) manage the public funds. Every state has its own governing legislation such as Employment Retirement Income Security Act as in the State of Illinois.
These funds are being managed either directly or through specified agencies. For example in California, the fund management is done through California Public Employee Retirement System popularly known as Calpers. While in some other states all public employees including teachers, police, firefighters, sanitation workers and the like are covered. There are also state sponsored statutorily provided schemes as part of the social contract between the state and the people. These apart, there are other schemes in the US that constitute a departure from the concept of a guaranteed benefit and linked the retirement benefit wholly to the stock market. As for private pension funds, some are managed by the companies themselves and are confined to their employees.

The pension schemes must be scientifically structured taking into account all relevant factors. A pension scheme is devised with reference to historical data such as life expectancy, inflation rates and so on. On the basis of this data, actuaries have to determine how much fund a pension scheme would need in the years from now in order to be able to pay the promised pension to the future retirees. This involves complex assessments of a whole lot of assumptions over long periods.

There are many ways indeed by which the pension beneficiaries have been deprived of their dues after retirement either in part or in full.

Next

* Contributed by -
Swetha Narayanaswamy,
First Year M.B.A.,
ICFAI Business School, Mumbai.