Pension fund investments and the valuation of liabilities under conditional indexation

Jong, Frank de

doi:10.1016/j.insmatheco.2006.11.004

Cited by 28 publications

(13 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A better duration match between assets and nominal liabilities at the same time improves results for indexation, even though long-term bonds are more inflation-sensitive than shortterm ones. This contrasts with the results by De Jong (2008) who finds that 5-year nominal bonds are preferred to 20-year ones. The main difference is that De Jong analyzes a finite (20 years) horizon, whereas we consider an infinite one.…”

Section: Augmented and Duration Matchedcontrasting

confidence: 99%

Market Valuation, Pension Fund Policy and Contribution Volatility

2008

View full text Add to dashboard Cite

SummaryMarket valuation is becoming more and more popular, both in accounting and regulation, as well as in academic circles. For pension funds and their participants, the knowledge that marketvalued pension liabilities can indeed be transferred to a third party, if necessary, is a great virtue. Using a simulation model, this paper demonstrates the implicit costs and benefits of using market valuation for a typical Dutch pension fund, which offers a guaranteed average pay nominal pension with conditional indexation. The impact turns out to be fairly small, if fixed discount rates are still used for conditional rights. However, if market valuation is used for both unconditional and conditional rights, contribution volatility increases significantly. A remedy is to increase the duration of assets considerably. It is not clear, though, whether this option is available for large pension funds given the limited supply of long-term bonds.

show abstract

Section: Augmented and Duration Matchedcontrasting

confidence: 99%

Market Valuation, Pension Fund Policy and Contribution Volatility

2008

View full text Add to dashboard Cite

show abstract

“…We assume the weighting factor of the social planner is the same as individuals' subjective discount factor, hence ∆ = e −δ = 0.96. 10 We calculate the social planner's designs for individuals with risk aversion of γ = 5. Table 4 shows the results for the social planner's optimal pension schemes.…”

Section: Welfare Of Future Generationsmentioning

confidence: 99%

Intergenerational risk sharing within funded pension schemes

Cui

Jong

Ponds

2010

Journal of Pension Economics and Finance

120

View full text Add to dashboard Cite

Is intergenerational risk sharing desirable and feasible in funded pension schemes? Using a multi-period OLG model, we study risk sharing between generations for a variety of realistic collective funded pension schemes, where pension benefits and contributions may depend on the funding ratio and the asset returns. We find that well-structured intergenerational risk sharing via collective schemes can be welfare-enhancing vis-à-vis the optimal individual benchmark. Moreover, from an ex ante perspective the expected welfare gain of the current entry cohort is not at the cost of the older and future cohorts.

show abstract

“…This can be decided by reference to the risk attitude of a typical member or, more realistically, the risk attitude of the trustees of the plan, a small group of people who run the plan in the interests of the members. An approach to deciding an investment strategy for a long-term investor like a pension fund is given in de Jong [21].…”

Section: Investment Strategymentioning

confidence: 99%

A Discussion of a Risk-Sharing Pension Plan

Donnelly

2017

Risks

View full text Add to dashboard Cite

I show that risk-sharing pension plans can reduce some of the shortcomings of defined benefit and defined contributions plans. The risk-sharing pension plan presented aims to improve the stability of benefits paid to generations of members, while allowing them to enjoy the expected advantages of a risky investment strategy. The plan does this by adjusting the investment strategy and benefits in response to a changing funding level, motivated by the with-profits contract proposed by Goecke (2013). He suggests a mean-reverting log reserve (or funding) ratio, where mean reversion occurs through adjustments to the investment strategy and declared bonuses. To measure the robustness of the plan to human factors, I introduce a measurement of disappointment, where disappointment is high when there are many consecutive years over which benefit payments are declining. Another measure introduced is devastation, where devastation occurs when benefit payments are zero. The motivation is that members of a pension plan who are easily disappointed or likely to get no benefit, are more likely to exit the plan. I find that the risk-sharing plan offers more disappointment than a defined contribution plan, but it eliminates the devastation possible in a plan that tries to accumulate contributions at a steadily increasing rate. The proposed risk-sharing plan can give a narrower range of benefits than in a defined contribution plan. Thus it can offer a stable benefit to members without the risk of running out of money.

show abstract

Pension fund investments and the valuation of liabilities under conditional indexation

Cited by 28 publications

References 25 publications

Market Valuation, Pension Fund Policy and Contribution Volatility

Market Valuation, Pension Fund Policy and Contribution Volatility

Intergenerational risk sharing within funded pension schemes

A Discussion of a Risk-Sharing Pension Plan

Contact Info

Product

Resources

About