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Risk-sharing in pension plans: multiple options

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  • Barr, Nicholas

Abstract

A response to pressures on pension finance caused by population ageing and economic turbulence has been a substantial move from traditional defined-benefit plans in which, at least in principle, all risk falls on the contributions side, to defined-contribution plans in which risk during accumulation all falls on the benefits side. This paper argues that both designs are ‘corner solutions’ and hence generally suboptimal, and goes on to set out a range of designs that offer different ways of sharing risk among workers, employers, future pensioners and current pensioners.

Suggested Citation

  • Barr, Nicholas, 2024. "Risk-sharing in pension plans: multiple options," LSE Research Online Documents on Economics 125669, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:125669
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    File URL: http://eprints.lse.ac.uk/125669/
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    More about this item

    Keywords

    defined contribution; defined benefit; risk sharing; population ageing;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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