How People React to Pension Risk

Nicolas Salamanca, Andries de Grip and Olaf Sleijpen
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Olaf Sleijpen: Department of Economics, Maastricht University; De Nederlandsche Bank

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We show that people exposed to greater pension risk are less likely to invest in risky assets. We exploit a reform that links people’s future pension benefits to their pension funds’ funding ratio—a measure of the fund’s financial health—making funding ratios a fund-specific measure of pension risk. The effect of pension risk is stronger for people who are better informed about their pensions, for retirees and pension-age non-retirees, and for wealthier people. The funding ratio does not affect investments in a pre-reform period, nor does it affect bequest intentions, (expected) retirement, or the motivations for saving.

Keywords: Individual portfolio choice; background risk; retirement planning; pension reform; The Netherlands (search for similar items in EconPapers)
JEL-codes: D14 J22 (search for similar items in EconPapers)
Pages: 41pp
Date: 2020-04
New Economics Papers: this item is included in nep-age, nep-cwa and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: How People React to Pension Risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2020n05

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