Virtually all state and local government employers in the United States offer workers some sort of retirement benefits today but there is significant variation in the characteristics of those plans. There is also a great deal of public angst about the level and timing of commitments made in these plans. The literature on retirement plans suggests that they are important elements of compensation that plan sponsors use in meeting their human resource goals. But public retirement plans are created and operated in a public policy environment and forces other than local labor market considerations may be brought to bear in the organization and operation of these plans. This paper explores some of the possible explanations for the variation in state retirement plans. Public disclosure data is used to develop a model that explains relative generosity of benefits based on the characteristics of participants and the marketplaces in which the plans are offered. The final section of the paper places the issues explored in a forward looking context. The public disclosure environment recently put in place for public retirement plans is likely to have a more profound effect on state pension operations than any other development in recent history.

We use data from the Swedish Financial Supervisory 2010 consumer survey to look at levels of financial literacy and retirement planning in the Swedish population. The results indicate that many adults have low financial literacy. In general, financial literacy levels are lower among the young, the old, women and those with low income or low educational attainment. People who report having tried to plan for retirement have higher levels of financial literacy. In particular, an understanding of risk diversification is strongly correlated with planning for retirement. We relate our findings to features of the Swedish pension system.

There is a potential conflict of interest between a pension fund sponsor and future pensioners when they share unequally in the pension fund performance. Thus, when a scheme offers a yearly guaranteed minimum return to pensioners, as is presently the case with German Pensionskassen, the sponsors cannot afford to invest in risky assets and consequently, pensioners end up with safe but very low expected returns. We examine optimal investment strategies for sponsors under alternative performance sharing rules and seek the rules that are most beneficial to pensioners. We find that the current yearly performance sharing rule imposed on Pensionskassen could be tilted in favor of sponsors without impairing the welfare of pensioners. We also find that the welfare of pensioners would be greatly enhanced if the guaranteed minimum return were applied to the cumulative return since inception of the scheme rather than to yearly returns. The ensuing credit risk taken by pensioners on sponsors could be kept to a minimum by proper regulation; this would induce sponsors to adopt safe constant proportionality portfolio insurance (CPPI) style investment strategies.

We examine the relationship between financial literacy and retirement planning in Russia, a country with a relatively old and rapidly ageing population, large regional disparities, and emerging financial markets. We find that only 36% of respondents in our sample understand interest compounding and only half can answer a simple question about inflation. In a country with widespread public pension provisions, we find that financial literacy is significantly and positively related to retirement planning involving private pension funds. Thus, along with encouraging the availability of private retirement plans, efforts to improve financial literacy can be pivotal to the expansion of the use of such funds.

While no longer common in the private sector, most public sector employers offer retiree health insurance (RHI) as a retirement benefit to their employees. While these plans are thought to be an important tool for employers to attract, retain, motivate, and ultimately retire workers, they represent a large and growing cost. This paper reviews what is currently known about RHI in the public sector, while highlighting many important unanswered questions. The analysis is informed by data produced in accordance with the 2004 Government Accounting Standards Board Rule 45 (GASB 45). We consider the extent of the unfunded liabilities states face and explore what factors may explain the variation in liabilities across states. The importance and sustainability of RHI plans in the public sector ultimately depend on how workers view and value this post-retirement benefit, yet little is known about how RHI directly impacts the public sector labor market. We conclude with a discussion of the future of RHI plans in the public sector.

We describe the pension plan features of the states and the largest cities and counties in the U.S. Unlike in the private sector, defined benefit (DB) pensions are still the norm in the public sector. However, a few jurisdictions have shifted toward defined contribution (DC) plans as their primary savings plan, and fiscal pressures are likely to generate more movement in this direction. Holding fixed a public employee's work and salary history, we show that DB retirement income replacement ratios vary greatly across jurisdictions. This creates large variation in workers’ need to save for retirement in other accounts. There is also substantial heterogeneity across jurisdictions in the savings generated in primary DC plans because of differences in the level of mandatory employer and employee contributions. One notable difference between public and private sector DC plans is that public sector primary DC plans are characterized by required employee or employer contributions (or both), whereas private sector plans largely feature voluntary employee contributions that are supplemented by an employer match. We conclude by applying lessons from savings behavior in private sector savings plans to the design of public sector plans.

We compare levels of financial literacy between the general adult population of New Zealand, people of Māori ethnicity, and people of Ngāi Tahu, a Māori tribe that is providing financial education to its members. While the level of financial knowledge of Māori people is generally lower than for non-Māori (controlling for demographic and economic factors), there is little difference between the financial knowledge of the people of Ngāi Tahu and other New Zealanders. Moreover, we find that financial literacy is not significantly associated with planning for retirement. This could reflect the dominant role of New Zealand's universal public pension system in providing retirement income security.

The level of financial literacy is not high in Japan. Although a majority of respondents were able to correctly answer a simple question about interest rates, more than half were not able to correctly answer a question about risk diversification. Many respondents stated they did not know the answer to the financial literacy questions, which might indicate that Japanese are very cautious and only answer when confident in their response. Women, the young, and those with lower incomes and lower educational attainment have the lowest levels of financial literacy, and financial literacy increases the probability of having a retirement savings plan.

Traditional defined benefit (DB) pension plans remain the overwhelming norm for teachers, policemen and other employees of state and local governments. The incentives for workers with DB pension plans to stay in their jobs shift dramatically over the course of their careers. Moreover, limited transferability of pension wealth across states and between public and private jobs impedes mobility in the labor market. Yet, little is known about the labor market effects of pensions on state and local government workers. The literature on private-employer pensions has made contributions on some of these fronts in recent years that can shed light on policy concerns raised by the possibility that pension plans will be modified in coming years. Moreover, some of the limitations constraining research on pensions may be overcome by focusing on government workers, with recent work on public school teachers pointing the way. Very recent studies are finding strong retirement responses to age- and tenure-related incentives built into state pension plans.

The OECD International Network on Financial Education has addressed the demand for an internationally comparable measure of financial literacy by developing a financial literacy questionnaire that can be used across a diverse range of countries. This questionnaire takes into account knowledge, behaviours, and attitudes related to personal finance and is designed to identify similarities and differences in levels of financial literacy around the world. It is currently being piloted in 12 countries, with the expectation that the final survey instrument will become a useful tool for policy-makers, academics, and financial education programme designers seeking to identify robust questions to assess financial literacy.