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Law, Probability and Risk Advance Access originally published online on March 6, 2007
Law, Probability and Risk 2006 5(3-4):201-232; doi:10.1093/lpr/mgm002
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© The Author [2007]. Published by Oxford University Press. All rights reserved.

Broken promises: solvency issues for defined benefit superannuation funds

Shauna Ferris{dagger}

Actuarial Studies Department, Macquarie University, Sydney, Australia

{dagger} Email: sferris{at}efs.mq.edu.au

Received on 8 September 2005. Revised on 7 January 2007. Accepted on 10 January 2007.


  Abstract

Members of defined benefit superannuation funds face risks arising from underfunding of benefits by employers. In several countries (including USA, UK, Canada and Australia) fund members have suffered significant losses. Although each country has legislation which is supposed to protect the members, it has often proven inadequate. We outline a framework for assessing the minimum funding standards and solvency legislation, pointing to potential weaknesses. The Australian solvency legislation is critically assessed, revealing some serious weaknesses which may result in loss of benefits for Australian workers and their dependants.

Keywords: superannuation; defined benefit funds; retirement income; solvency regulation; minimum funding requirements


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