Optimal risk-sharing in private and collective pension contracts

C. G. E. Boender, A. L. Bovenberg, S. Hoogdalem and Th. E. Nijman
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C. G. E. Boender: ORTEC
A. L. Bovenberg: University of Tilburg
S. Hoogdalem: ORTEC
Th. E. Nijman: CentER

Chapter 5 in Costs and Benefits of Collective Pension Systems, 2007, pp 75-93 from Springer

Abstract: Abstract Pension solidarity can no longer be taken for granted. Due to demographic changes - and hence a growing retiree/employee ratio - additional contributions offer steadily fewer opportunities for clearing pension shortfalls. Together with the growing costs of contribution volatility and the trend towards short-termism, this means that the added value of solidarity is increasingly being called into question. A carefully argued and well-substantiated answer is therefore in order. What is the added value of solidarity and what is an 'optimal' pension contract? This contribution seeks to provide a survey of what we can learn about these issues from the current academic literature and to identify those areas where further in-depth research is warranted. The starting point consists of the private and collective pension contracts that are perceived to be optimal in the academic literature. However, the practical questions regarding pension funds and the economic environment in which pension funds operate are considerably more complex than assumed in the literature. Additional research is necessary to answer the central questions concerning the added value of pension solidarity and the optimal form of pension contracts. This contribution analyses how the assumptions and findings of the WRR study (Boender et al., 2000) relate to the customary assumptions in the academic literature. It specifies what we can learn from this about the added value of pension solidarity as calculated in that study. The insights in this contribution do not result in a single uniform answer regarding the exact added value of pension solidarity and the precise form of optimal pension contracts. Our aim here is rather to arrive at a number of concrete research questions in order to gain a deeper understanding of the underlying considerations and to be able to build a bridge in the near future between the academic literature and complex reality.

Keywords: Human Capital; Gross Domestic Product; Financial Market; Pension System; Financial Capital (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-74374-3_5

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DOI: 10.1007/978-3-540-74374-3_5

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