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March 19, 2014

While public debate has mainly focused on the “gold-plated” defined benefits of many public-service pension plans, the real problem lies in a flawed approach to managing compensation costs, according to respected pension expert Malcolm Hamilton.  In, “Evaluating Public-Sector Pensions: How Much Do They Really Cost?” Hamilton says the problem is government sponsors who typically underestimate the cost of guaranteeing pay-outs in the future, leading to the undervaluation of employee pension costs and the mismanagement of employee compensation. “The problem is not with the defined-benefit plans per se, it relates to the mispricing of their guarantees, which leads to the over-compensation of employees and badly accounted-for risks to future taxpayers,” says Hamilton.

 

Malcolm Hamilton
Malcolm Hamilton, Former Partner, Mercer, Senior Fellows

Mr. Hamilton was a Partner with Mercer where he was employed between 1979 and his retirement in December 2012. Before that, he was employed by the Sun Life Assurance Company of Canada.