Guaranteeing Defined Contribution Pensions: The Option to Buy Back a Defined Benefit Promise

Aggregate Implications of Defined Benefit and Defined Contribution Systems

One of the most significant fiscal challenges facing governments in the next few decades is the financing of retirement benefits. Due to this challenge, governments are considering a variety of social security reforms. This paper investigates the implications of different reforms for a nation’s economy and for the welfare of its citizens. Specifically, the authors explore the economic outcomes ...

Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth.

The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on the participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. Thi...

The Life Cycle Model with Recursive Utility: Defined benefit vs defined contribution

We analyze optimal consumption and portfolio choice when the agent takes the market as given, with applications to pension insurance. First, we recall the results for the conventional additive and separable expected utility model. We explain why this model is not viable in a temporal context. As a consequence, when confronted with real data this theory meets with several conflicting implication...

Risky Business: The Decline of Defined Benefit Pensions and Firms' Shifting of Risk

Annuity choices and income drawdown: evidence from the decumulation phase of defined contribution pensions in England*

We provide new empirical evidence on the importance of defined contribution pension wealth in England, and the nature of annuitization decisions taken by older adults who retire with such sources of wealth. Other things equal, financial literacy, and numeracy in particular, are important factors governing individuals' choices over whether to shop around for an annuity as opposed to taking the '...