The last issue of the fifth volume of the JPEF features 4 research articles, an issues & policy paper and a book review section. The first paper in the issue looks at how unemployment affects retirement savings for those with DC plans. Jason Seligman and Jeffrey Wenger of the University of Georgia find that unemployment magnifies pension losses because unemployment occurs at the same time as equity markets decline so that workers systematically lose not just from unemployment but also from declines in the stock market. Because unemployed workers do not have funds to invest when the stock market is relatively low, they stand to lose from subsequent increases in equity markets. The authors look at who is affected most and find that nearly ten percent workers will lose between 8 and 13% of their retirement savings due to unemployment. The results overall indicate the importance of incorporating human capital factors such as unemployment spells and changes in the wage distribution into retirement planning models.

Retirement savings in defined contribution plans vary as a result of the timing and frequency of unemployment spells. We hypothesize that unemployment is coincident with negative shocks to equities prices, implying workers may systematically miss investment opportunities. First we match historic stock returns to unemployment hazards by gender, and earnings quartile. Next we test the relationship between unemployment, equity returns, and pension savings, by repeated simulation. Finally, we find that the timing of unemployment spells amplifies retirement savings losses on average for all worker-types in our analysis. Timing impacts are observed to be largest for high earnings workers and to increase with unemployment losses disproportionately.

This paper presents evidence from the British Household Panel Survey (BHPS) on the persistency of contributions to individual, private pensions. The BHPS contains a wealth of information on individuals' socio-economic and demographic characteristics, allowing detailed analysis of how individual circumstances – and changes in those circumstances – can affect whether or not someone continues to contribute. The paper finds variation in persistency rates by gender, earnings, and household income. As might be expected, changes in income and consumption needs (for example, becoming unemployed or the arrival of a new baby) increase the probability of lapse, but, conditional on these changes, the level of household income also matters, suggesting that pensions may be less affordable for those on low incomes, even in the absence of shocks.

Pension systems are complex and diverse, so comparing them is consequently difficult. Yet there are valuable lessons to be learned from the pension experiences of other nations. International comparisons of pension systems have focused almost wholly on the fiscal aspects of ageing populations. This paper provides consistent data on pension entitlements for the 30 member countries of the OECD, allowing cross-country analysis of the adequacy and distribution of pension promises.

The following section provides a brief description of the 30 retirement-income regimes and compares key parameters, such as pension eligibility ages, ceilings on pensionable earnings, contribution rates to defined-contribution schemes and accrual rates for defined-benefit plans. Section 2 sets out the methodology for and assumptions used in modelling pension entitlements. Section 3 presents replacement rates, the most commonly used indicator in pension analysis. Section 4 calculates pension wealth, the present value of the flow of pension entitlements, which captures the effects of cross-country differences in life expectancy, pension eligibility ages, and indexation of pensions in payment. The concept of weighted averages is introduced in Section 5: a way of summarizing the main indicators across the range of individual earnings. The structure of the pension package, that is the role that different components of the retirement-income system play, is explored in Section 6. Section 7 presents a measure of the progressivity of the pension benefit formula, while Section 8 concludes.

This paper evaluates the overall investment performance of Australian pension funds by examining the determinants of risk-adjusted performance, and the relationship between risk, returns, and expenses. Using quarterly return data for 225 pension funds comprising 68% of total prudentially regulated pension fund assets, we find significant differences exist across fund types. On both a net return and risk-adjusted performance basis, not-for-profit funds significantly outperformed for-profit funds over the seven years to June 2002. We suggest that the performance difference is consistent with the hypothesis that agency costs in for-profit funds (due to non-representative trustee board structures and potential board member conflicts of interest) are greater than agency costs in not-for-profit funds (with representative trustee boards).

Investors generally face inflation-linked obligations – a fact contributing to the popularity of TIPS and other inflation-linked bonds. With TIPS, one characterization of inflation, the Consumer Price Index, applies to all investors. Investors, however, face different inflation. To date, these heterogeneous needs have not been addressed by the inflation-linked marketplace. The paper describes the case for and mechanics of splitting TIPS into disaggregated TIPS matched to components of the Consumer Price Index. Disaggregated TIPS better address the risks of investors' specific real liabilities. A case study highlights disaggregated TIPS applicability to retirees with heavier post-retirement medical needs.