Universal Fully Funded Pensions versus Individualized Retirement Savings Accounts: A Comparison of Fully-Funded Pension Options

In light of the ongoing debate over pension reform and privatization, two fully-funded mandatory pension systems are examined: the Universal Fully Funded Pension (UFFP), and the Individual Savings Account (ISA) plans. The UFFP is a plan that retains the social aspect of public pensions, in which individuals pool longevity risk. The ISA system allows individuals to maintain ownership over their contributions, but does not pool longevity risk. Simulation exercises show that the UFFP system affords retirees much higher benefits and consumption levels over their lifetimes than what would be available under an ISA plan, when longevity is uncertain.