Pension Obligation Bonds: Financial Crisis Exposes Risks


It is risky for state and local governments to shore up pensions with such bonds except in certain circumstances.

Alicia H. Munnell, Thad Calabrese, Ashby Monk, and Jean-Pierre Aubry of the Center for Retirement Research at Boston College
Publication date:
January 2010
Filed under:
Research Studies
Key findings:
  • Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
  • POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
  • Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.
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Pension obligation bonds