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The structural impact of the shift from defined benefits to defined contributions

Author

Listed:
  • Ghio, Maddalena
  • Ghiselli, Angelica
  • Mosk, Benjamin
  • Rousová, Linda

Abstract

This box studies the potential consequences of the ongoing shift away from defined benefit (DB) towards defined contribution (DC) products in the insurance and pension fund (ICPF) sector. In view of the different risks associated with these products, their portfolio allocations differ, with DB products being more heavily invested in long-duration fixed-income assets. Given the sizeable amount of ICPFs’ assets under management, the move from DB to DC products can reduce the demand for these assets, potentially having profound effects on the financial system and the economy. Such effects may include a steeper yield curve, a boost to equity financing, and more uncertainty in the build-up of retirement savings. JEL Classification: G22, G23, H55, E34, E44

Suggested Citation

  • Ghio, Maddalena & Ghiselli, Angelica & Mosk, Benjamin & Rousová, Linda, 2021. "The structural impact of the shift from defined benefits to defined contributions," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2021:0005:8
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2021/html/ecb.ebbox202105_08~5b846b2f5a.en.html
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    More about this item

    Keywords

    defined benefit; defined contribution; insurance corporations; Pension funds;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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