Systems of Retirement Provision

The system of retirement provision that exists in the developed countries, is generally described as having three separate pillars : 1. Social security provided by the State which takes two forms. It may be an entitlement to assistance which is means tested and based upon income an example of which is the old age non-contributory pension. It may be both insured and employment based an example of which is the state retirement pension.

2. Employment based pension benefits such as provided under occupational pension schemes. In the case of employees in the civil service and public sector, where the State is the ultimate employer there are statutory based pension schemes.

3. Personal savings which may take many forms. Savings in financial institutions together with investments would be included. What are described as personal pension plans in the United Kingdom and Individual Retirement Accounts in the United States fall into this category.

It is not always clear whether statutory schemes established by law are part of the first pillar, or of the second pillar. In addition there is often integration between State social security schemes and occupational pension schemes. The line between the second pillar and the third pillar is also sometimes blurred, for example individual plans financed through salary deduction.