This book is the result of a partnership organized by the World Bank, that includes the Organisation for Economic Co-operation and Development (OECD), and three private sector partners (the international banks BBVA and ING and the Dutch Association of Industry-wide Pension Funds (VB)). The aim was to examine how to measure financial performance of pension funds taking into account the link between participants’ benefits and the performance of financial markets. The recent financial crisis has shown the potential volatility and unpredictability of retirement income, increasing the need to establish meaningful performance measures that consider pension funds in relation to the ability to effectively provide income replacement at retirement age.
Although pension funds aim to provide income replacement in retirement over the long-term and other forms of collective investments are primarily concerned with short term wealth maximization, the performance measures that have typically been applied to pension funds are identical to those used to evaluate the performance of other type of investments. The report highlights that performance measures should focus on the long term instead.