Coursework 3 Individual Report Essay Example | Topics and Well Written Essays - 1750 words

Coursework 3 Individual Report - Essay Example Pension crisis is a foreseen problem or difficulty in settling federal, corporate, and state pensions in the European nations and US. This might come about due a difference in the available resources to settle the pension and the pension obligations that arise. Studies show that the major factors contributing to this situation include lower birth rates, and most retirees living longer (The Economist, 2008). Reasons for this situation sometimes may vary depending on the nation. A good example is the current pension crisis in Pennsylvania. The country is facing this crisis due to its two-pension systems Public School Employees and State Government Workers both have over 40 billion dollars in debt (Priya, 2013). This crisis started surfacing back in 2001. A ten billion dollar hole was created in the pension systems when â€Å"Facing a flush stock market and a fully funded system, legislators raised benefits for state and school workers by 25 percent, hiked their own benefits by 50 percent, and created a cost-of-living increase for retired workers a year later† (Priya, 2013, para. 5). Therefore, from the above situations it is clear that the pension crisis situation is a predictable future situation. It is affected by the current financial actions carried out by the pension system and changes in demographics. There are a few key differences in taking up Money Purchase pension scheme or final Salary Pension scheme. These differences revolve around; who bears the risk, the calculation of pension to receive and performance of markets. In a Final Salary scheme, the benefits are promised, meaning individuals can compute the pension they are going to receive in advance basing on the salary at retirement and number of years as a member (WorkSmart, 2012). Money Purchase, on the other hand does not provide a means to calculate the final amount of pension an individual will receive. The size of benefits they