Within the global debate regarding the provision and management of retirement pensions, two issues continue to attract the attention of academics and practitioners alike. They are the role of payout annuities in a well-balanced portfolio and the corporate governance of pension plans. We are happy to present the current issue of the JPEF which addresses both of these topics and provides a number of interesting and important conclusions.

Annuities provide insurance against outliving one's wealth. Previous studies have indicated that, for many households, the value of the longevity insurance should outweigh the actuarial unfairness of prices in the voluntary annuity market. Nonetheless, voluntary annuitization rates are extremely low.

Previous research on the value of annuitization has compared an optimal decumulation of unannuitized wealth with the alternative of annuitizing all unannuitized wealth at age 65. We relax these assumptions, allowing households to annuitize any part of their unannuitized wealth at any age and to return to the annuity market as many times as they wish.

Using numerical optimization techniques, assuming the levels of actuarial unfairness of annuities calculated in previous research, and retaining the assumption made in previous research that one half of household wealth is pre-annuitized, we conclude that it is optimal for couples to delay annuitization until they are aged 73–82, and in some cases never to annuitize. It is usually optimal for single men and women to annuitize at substantially younger ages, between 65 and 70. Households that annuitize will generally wish to annuitize only part of their unannuitized wealth.

Using data from the Asset and Health Dynamics Among the Oldest Old and Health and Retirement Study panels, we show that much of the failure of the average currently retired household to annuitize can be attributed to the exceptionally high proportions of the wealth of these cohorts that is pre-annuitized. We expect younger cohorts to have smaller proportions of pre-annuitized wealth and project increasing demand for annuitization as successive cohorts age.

As members of the Australian workforce approach retirement, they are being presented with increased choice in their superannuation investments. With increased choice has come greater personal responsibility for ensuring adequate retirement savings. This paper explores gender differences in superannuation investment choices through a range of interactions with individual demographics and in doing so a gender effect can be further refined than previous research has identified. The data for this paper comes from a survey of members of the Superannuation Scheme for Australian Universities (SSAU).

A reform process is underway in Italy. Achieving financial sustainability of the social security system has been the first objective characterizing the reforms of 1990s, but these have also introduced rules which aim at a more actuarially fair system. Indeed the social security system prevailing in Italy, financed on a PAYG basis, was, at the end of the 1980s, clearly unsustainable and also extremely unfair to some group of workers, enacting a form of perverse redistribution which is typical of ‘final salary’ defined benefit systems. It was also a system characterized by strong incentives to retire early.

In this paper we briefly describe the different regimes of the Italian pension system in its recent history and focus on some aspects of the reform process taking place during the 1990s. Since economists and policy makers are still struggling to assess the results and the long-term effects of these reforms we provide both a survey of this debate and some fresh evidence on the evaluation of the policy changes. We carry out this analysis with a particular emphasis on two aspects which are relevant in the debate. On the one hand we stress the role of economic incentives and the overall fiscal implications of changing the systems as well as these incentives. On the other hand we emphasize the intergenerational considerations and the political implications of the ageing process of the Italian population. From our description it emerges that the overall design of the Italian reform is probably a good one, and yet some more steps need to be taken to speed up some of the positive effects of the reform process that, due the adverse demographic trends affecting PAYG systems as well as the political arena, could easily evaporate.

Conventional wisdom holds that pension reforms from pay-as-you-go to fully funded systems spur the development of stock markets through a corporate governance channel, i.e. pension funds become large shareholders of publicly traded firms and therefore have the incentives to monitor managers and improve investor protections. This paper reviews the literature on the corporate governance channel associated with pension reforms in developing countries, and asks what we know and need to know about it. We know that pension funds are not yet large shareholders of publicly traded firms in developing countries. However, econometric results suggest that pension reforms lead to stock market development, but do not allow us to identify and separate the corporate governance channel. We know that pension reforms are followed by pro-investor legislation, but there is no convincing evidence that the pro-investor laws are enforced. We need to know more about the effects of pension reform on stock prices and performance of publicly traded firms, and whether pension fund management companies act in the best interest of pensioners. The paper also reviews the political economy explanations of the links between pension fund specific capital controls and the corporate governance channel, and suggests that there is a trade-off between the objectives of pensioners' welfare maximization, and corporate governance reform and stock market development.

Responsible for the welfare of beneficiaries, pension funds have many tasks and functions. Consequently, their governance and regulation are issues of public concern with direct bearing on the interests of stakeholders and ultimately the performance of Anglo-American financial markets. Subject to common law expectations regarding proper trustee behaviour, also important are statutory requirements regarding the equitable treatment of beneficiaries and the management of assets and liabilities. At one level, discretion is an essential attribute of the trust institution – trustees act on behalf of others not so well placed to manage their own long-term welfare because of lack of knowledge and/or ability. At another level, pension funds are presumably regulated by a well-defined purpose – the welfare of beneficiaries. In this paper, I look at the internal governance of pension funds emphasizing codes of practice, the rules and procedures for decision making, and trustee competence and expertise. While it is important to observe codes of conduct like those advocated by the OECD, there may be significant problems with any system of governance that relies upon rules and procedures. Inertia rather than innovation may be the net result. These issues are developed with reference to defined benefit and defined contribution schemes (and their variants). Ultimately, pension fund governance reflects, more often than not, its nineteenth-century antecedents rather than the financial imperatives of the twenty-first century.