Intergenerational risk sharing within funded pension schemes

Cui, Jiajia; Jong, F.C.J.M. de; Ponds, Eduard

doi:10.1017/s1474747210000065

Cited by 120 publications

(86 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Overall, the collective pension scheme outperforms the individual scheme, but only when both the contribution and indexation adjustment policies can be simultaneously employed to share the risks. The same result was obtained by Cui et al (2011). Further, for given adjustment parameters for the contribution and indexation, EET outperforms TEE.…”

Section: Social Welfare Comparisonsupporting

confidence: 80%

“…There is already quite a substantial amount of work that studies intergenerational risk-sharing within a funded pension scheme. Examples are Teulings & Vries (2006); Gollier (2008) and Cui et al (2011), who show how a welldesigned pension fund improves welfare. By exploiting the benefits of intergenerational risk-sharing, more risk can be taken, which results in higher expected returns.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Intergenerational risk-sharing through funded pensions and public debt

Chen¹,

Beetsma

Ponds

et al. 2014

Journal of Pension Economics and Finance

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We explore the benefits of intergenerational risk-sharing through both private funded pensions and via the public debt. We use a multi-period overlapping generations model with a PAYG pension pillar, a funded pension pillar and a government. Shocks are smoothed via the public debt and variations in the indexation of pension entitlements and the pension contribution rate, which both respond to funding ratio of the pension fund. The intensity of these adjustments increases when the funding ratio or the public debt ratio get closer to their boundaries. The best-performing pension arrangement is a hybrid funded scheme in which both contributions and entitlement indexation are deployed as stabilisation instruments. We find trade-offs between the optimal use of these instruments. We also find that entitlement indexation and the response of the tax rate to public debt movements are complements. We compare different taxation regimes and conclude that a regime in which pension benefits are taxed, while contributions are paid before taxes, is preferred to a regime in which contributions are paid after taxes, while benefits are untaxed. Terms of use: Documents inJEL-Code: G230, H550, H630.

show abstract

Section: Social Welfare Comparisonsupporting

confidence: 80%

Section: Introductionmentioning

confidence: 99%

Intergenerational risk-sharing through funded pensions and public debt

Chen¹,

Beetsma

Ponds

et al. 2014

Journal of Pension Economics and Finance

View full text Add to dashboard Cite

show abstract

“…Multiperiod allocation problems have been considered for instance by Gale and Machado (1982); Barrieu and Scandolo (2008);Gollier (2008); Cui et al (2011). Existence and uniqueness of Pareto efficient and financially fair allocation rules in the multiperiod context has been shown by Bao et al (2017) using methods analogous to the ones in the present paper.…”

Section: Conclusion and Further Researchmentioning

confidence: 91%

The composite iteration algorithm for finding efficient and financially fair risk-sharing rules

Pazdera

Schumacher

Werker

2017

Journal of Mathematical Economics

View full text Add to dashboard Cite

The composite iteration algorithm for finding efficient and financially fair risk-sharing rules Pazdera, J.; Schumacher, J.M.; Werker, B.J.M. Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: http://uba.uva.nl/en/contact, or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. AbstractWe consider the problem of finding an efficient and fair ex-ante rule for division of an uncertain monetary outcome among a finite number of von Neumann-Morgenstern agents. Efficiency is understood here, as usual, in the sense of Pareto efficiency subject to the feasibility constraint. Fairness is defined as financial fairness with respect to a predetermined pricing functional. We show that efficient and financially fair allocation rules are in one-to-one correspondence with positive eigenvectors of a nonlinear homogeneous and monotone mapping associated to the risk sharing problem. We establish relevant properties of this mapping. On the basis of this, we obtain a proof of existence and uniqueness of solutions via nonlinear Perron-Frobenius theory, as well as a proof of global convergence of the natural iterative algorithm. We argue that this algorithm is computationally attractive, and discuss its rate of convergence.

show abstract

“…There is a substantial amount of literature that deals with optimal payout and investment policies in collective pension funds or PAYG pension systems (see, e.g., Enders and Lapan, 1982;Gordon and Varian, 1988;Krueger and Kubler, 2002;Ball and Mankiw, 2007;Gollier, 2008;Cui et al, 2011). Our study differs from this literature in two ways.…”

Section: Introductionmentioning

confidence: 96%

Intergenerational risk sharing in closing pension funds

Boonen

Waegenaere

2017

Insurance: Mathematics and Economics

View full text Add to dashboard Cite

We model intergenerational risk sharing in closing funded pension plans. Specifically, we consider a setting in which in each period, the pension fund's investment and indexation policy is the outcome of a bargaining process between representatives of the then living generations. Because some generations might be under-or overrepresented in the board, we use the asymmetric Nash bargaining solution to allow for differences in bargaining powers. In a numerical study, we compare the welfare that the generations derive from the outcome of this repeated bargaining to the welfare that they would derive if a social planner's optimal policy would instead be implemented. We find that as compared to the social optimum, older generations benefit substantially from the repeated bargaining, even if all generations are equally well-represented in the board. If older generations are relatively over-represented, as is sometimes argued, these effects are attenuated.JEL-codes: C78, D9, G23.

show abstract

Intergenerational risk sharing within funded pension schemes

Cited by 120 publications

References 33 publications

Intergenerational risk-sharing through funded pensions and public debt

Intergenerational risk-sharing through funded pensions and public debt

The composite iteration algorithm for finding efficient and financially fair risk-sharing rules

Intergenerational risk sharing in closing pension funds

Contact Info

Product

Resources

About