The Center For Retirement Research has released a new brief on the state of Pension Obligation Bonds (POB) – the debt vehicle used by many state and local governments to cover their pension contributions. The report reveals that POB’s do provide the budget relief governments are looking for. But that relief doesn’t come with its downsides.
From the brief:
The brief’s key findings are:
- Some state and local governments issue Pension Obligation Bonds (POBs) to cover their required pension contributions.
- POBs offer budget relief and potential cost savings, but also carry significant risk.
- POBs had anegative average real return from 1992-2009, but show a small gain when the time period is extended to 2014.
- POBs could be a useful tool for fiscally sound governments or as part of a broader pension reform package for fiscally stressed governments.
- But results to date suggest that, instead, POBs tend to be issued by governments under financial pressure who have little control over the timing.
Read the whole report here:
http://crr.bc.edu/briefs/an-update-on-pension-obligation-bonds/