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- Title
RISK REALLOCATION IN DEFINED-CONTRIBUTION FUNDED PENSION SYSTEMS.
- Authors
Beetsma, Roel M. W. J.; Bucciol, Alessandro
- Abstract
This paper explores the introduction of collective risk-reallocation elements into defined-contribution pension contracts. We consider status-contingent, age-contingent, and asset-contingent arrangements to reallocate risk among participants. Eliminating asset market risk for the retired raises their welfare, whereas it lowers the welfare of the workers, despite the fact that they benefit later from the same arrangement. Overall welfare falls. The welfare effects are largest when personal and pension portfolios are optimally chosen. Allowing for intragenerational heterogeneity, the highest-skilled retirees benefit most, whereas the highest-skilled workers lose most. Our main results are qualitatively robust to a number of model variations and extensions.
- Subjects
DEFINED contribution pension plans; CONTRACTS; RETIREMENT investments; CONTINGENT employment; PUBLIC welfare; RISK assessment
- Publication
Macroeconomic Dynamics, 2015, Vol 19, Issue 1, p22
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100513000205