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How People React to Pension Risk

Nicolas Salamanca (), Andries de Grip () and Olaf Sleijpen ()

No 13077, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: 40 pages
Date: 2020-03
New Economics Papers: this item is included in nep-age, nep-eur and nep-rmg
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