Hybrid Occupational Pension Schemes in Selected Countries
DOI:
https://doi.org/10.18559/SOEP.2018.7.1Keywords:
Employee pension programmes, Pensions, Retirement programs, Occupational Pension Schemes, Retirement benefitsAbstract
Two main types of occupational pension schemes are defined contribution (DC) schemes and defined benefit (DB) schemes. In DC schemes benefit amount depends on many factors, such as the amount of contributions paid into the scheme and rate of the scheme's investment returns. In DB schemes benefit amount is known and defined in advance, and is independent of the rate of investment returns. This means that in DC schemes risk (e.g. investment or longevity risk) is borne by the member and in DB schemes by the employer. Hybrid pension schemes are schemes which are not purely DC or DB, but a mixture of both. These schemes allow for the risk to be shared between the member and employer, making them more attractive than traditional forms. The article presents the most common types of hybrid pension schemes and characterises different variations functioning in selected countries. Data on contributions paid into occupational pension schemes has been used to illustrate the prevalence of hybrid schemes in selected countries.
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