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Risk Sharing in Defined-Contribution Funded Pension Systems

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Abstract

This paper explores the introduction of collective risk-sharing elements in defined contri-bution pension contracts. We consider status-contingent, age-contingent and asset contingent risk-sharing arrangements. All arrangements raise aggregate welfare, as measured by equiva- lent variations. While working individuals hardly benefit or may even lose, retirees experience substantial welfare gains. An increase in the tax deductability of pension contributions can be beneficial for working cohorts, but comes at the cost of a reduction in aggregate welfare due to efficiency losses.

Suggested Citation

  • Roel Beetsma & Alessandro Bucciol, 2011. "Risk Sharing in Defined-Contribution Funded Pension Systems," CESifo Working Paper Series 3640, CESifo.
    • Handle: RePEc:ces:ceswps:_3640
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    Cited by:

    1. Chen, Damiaan H. J. & Beetsma, Roel M. W. J. & Ponds, Eduard H. M. & Romp, Ward E., 2016. "Intergenerational risk-sharing through funded pensions and public debt," Journal of Pension Economics and Finance, Cambridge University Press, vol. 15(2), pages 127-159, April.

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    More about this item

    Keywords

    funded pensions; risk-sharing; defined contribution; inter-generational welfare; equivalent variation; stochastic simulations;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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