How can the state pension system mitigate market failure in private sector pension provision?
Types of Pension Scheme
-Social security system, Beveridgean system, Bismarckian system
-Occupational pension schemes or plans
-Any additional savings for retirement that the individual chooses above that provided by the state or the company for whom the individual works
Risks in Private Pension Schemes
-Replacement rate risk { the risk that the pension will be insufficient to maintain the same standard of living after retirement as before retirement as a result of inadequate contributions made during the accumulation stage.
-Inflation risk, the risk that inflation will reduce the purchasing power of retirement savings.
-Political risk , the risk of explicit changes by the government in the law that adversely affect the contributions to and/or bene ts from a pension scheme, such as the removal of favourable tax breaks on contributions.
-Portability risk, the risk that accrued pension benefits are not fully portable when the member changes jobs.
-Employer insolvency risk { the risk that the pension scheme has a de cit at the time the employer becomes insolvent.
Systematic demographic risk occurs as a result of systematically increasing longevity and systematically declining fertility.