Government Guarantee Funds9
In several countries, government guarantee funds have been established to ensure DC private pension plans. The goal of such guarantees is to reduce an individual’s exposure to
investment and other risks associated with private plans and to diversify the risk of pension fund failures among the general population of pension plans. In developing countries, especially in Latin America where they have sprouted, government guarantee schemes have helped to ease the transition from government sponsored DB plans to privately run DC plans. It is expected that guarantee funds will grow in importance as more countries shift to greater emphasis on private plans.
Government pension guarantees, as illustrated by the practices in the Latin American region, have commonly been of two forms:
• A guarant...
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