The Public Finance Implications of Private Pensions: An Analysis with Special Reference to the United Kingdom

In an effort to take the costs of pensions "off the books", many have advocated giving a greater role to funded benefits, privately provided. However, where governments have adopted such an approach, they have both mandated contributions to the private schemes and sought, in the interests of consumer protection, to regulate them. Moreover, in many cases, either explicitly or implicitly, they have made some guarantees about the benefits that will be received. This paper, which makes special reference to plans and debates in the United Kingdom, argues that governments have, therefore, taken on some contingent liabilities, and that these liabilities have public finance implications. Even with privatization, not all the costs of pensions will be "off budget".