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- Title
Evaluating Risk Sharing in Private Pension Plans.
- Authors
Blommestein, Hans; Janssen, Pascal; Kortleve, Niels; Yermo, Juan
- Abstract
The principal purpose of this article is to analyse the trade-off between the (un)certainty in contributions on the one hand and benefits on the other that is embedded in different pension arrangements. The article employs the funding ratio (ratio of assets to liabilities) and the replacement rate (ratio of benefits to salaries) as key criteria for evaluating the risk sharing characteristics of a private pension plan from the perspective of the plan member. The stochastic simulations performed show that hybrid plans (those in between traditional DB and individual DC) appear to be more efficient and sustainable forms of risk sharing than either of the other two. Of the three main hybrid plans analysed, conditional indexation plans appear to have the greatest potential as sustainable forms of risk sharing.
- Subjects
PENSIONS; STOCHASTIC processes; INVESTMENTS; INFLATION risk; RETIREES
- Publication
OECD Journal: Financial Market Trends, 2009, Vol 2009, Issue 1, p163
- ISSN
1995-2864
- Publication type
Article