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Optimal Investment Policies for Hybrid Pension Plans - Analyzing the Perspective of Sponsors and Members

Author

Listed:
  • Albrecht, Peter

    (Sonderforschungsbereich 504)

  • Coche, Joachim

    (European Central Bank)

  • Maurer, Raimond

    (Lehrstuhl fuer Investment, Portfolio Management und Alterssicherung)

  • Rogalla, Ralph

    (Department of Finance)

Abstract

This paper analyzes investment strategies in the context of alternative hybrid pension plans which are optimal either from the perspective of the plan sponsor or the beneficiaries. The focus is in particular on how the introduction of minimum and maximum limits for pension benefits as well as minimum guarantees and caps on the return of the members’ individual investment accounts affect the investment decision. The study finds that portfolio choice of sponsor and beneficiaries shows substantial differences depending on the exact plan design and the beneficiaries’ risk aversion. The introduction of caps on investment returns emerged a possible means to reduce such differences and to share investment risks and returns more equally between sponsor and beneficiaries.

Suggested Citation

  • Albrecht, Peter & Coche, Joachim & Maurer, Raimond & Rogalla, Ralph, 2005. "Optimal Investment Policies for Hybrid Pension Plans - Analyzing the Perspective of Sponsors and Members," Sonderforschungsbereich 504 Publications 05-28, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:05-28
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    File URL: http://www.sfb504.uni-mannheim.de/publications/dp05-28.pdf
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