Real Pension Rights as a Control Mechanism for Pension Fund Solvency
Jacob Bikker (),
Thijs Knaap () and
No 11-15, Working Papers from Utrecht School of Economics
This paper models policy responses to changes in solvency by Dutch occupational pension funds using a unique panel dataset containing the balance sheets of all registered pension funds in the Netherlands over a period of 15 years (1993â€“2007). The model describes how nominal pension rights are expanded, by e.g. indexation or backservice, or, on the contrary, how the current pension accumulation is skimmed, e.g. by setting the pension premium over its actuarially fair price to build buffers. Policy responses are explained by the funding ratio and other pension fund characteristics such as pension fundsÂ´ size and type, and participantsâ€™ ages. We find that pension rights are expanded in line with the funding ratio, but that the pension fundsâ€™ response function exhibits two sharp and significant behavioural breaks, close to the minimum funding ratio of 105% and the target ratio of around 125%. These levels also play a pivotal role in current supervisory regulation. We further find that large pension funds and grey funds are relatively generous to participants.
Keywords: pension funds; pension rights; risk sharing instruments; indexation; funding ratio; solvability; regime shifts (search for similar items in EconPapers)
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Working Paper: Real Pension Rights as a Control Mechanism for Pension Fund Solvency (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:use:tkiwps:1115
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