Funding ratio indicates the funding status of a specific pension plan. The ratio of the asset set aside for a public sector pension fund over the fair value of its accrued future benefits defines the funding ratio in this thesis. This research starts with an international overview of public sector pensions which concludes a diversity of funding ratios by public sector pension funds across countries. However, explanations for such a diversity of funding ratios by public sector plans are rare in the literature. To fill in the blank, this thesis addresses the following research questions:
1. What drives the diverse funding ratios of public sector plans from the perspective of politics?
2. Is there optimal funding ratio for public sector plans?