scholarly journals Optimal investment strategies and risk measures in defined contribution pension schemes

2002 ◽  
Vol 31 (1) ◽  
pp. 35-69 ◽  
Author(s):  
Steven Haberman ◽  
Elena Vigna
Keyword(s):  
Risk Measures ◽  
Optimal Investment ◽  
Investment Strategies ◽  
Defined Contribution ◽  
Pension Schemes

scholarly journals An analysis of the Dutch-style pension plans proposed by UK policy-makers

2021 ◽  
pp. 1-21
Author(s):  
IQBAL OWADALLY ◽  
RAHIL RAM ◽  
LUCA REGIS
Keyword(s):  
Risk Sharing ◽  
Pension Plans ◽  
Retirement Savings ◽  
Investment Strategies ◽  
Defined Contribution ◽  
Replacement Rate ◽  
Policy Makers ◽  
Pension Schemes ◽  
Simulation Based ◽  
The Uk

Abstract Collective Defined Contribution (CDC) pension schemes are a variant of collective pension plans that are present in many countries and especially common in the Netherlands. CDC schemes are based on the pooled management of the retirement savings of all members, thereby incorporating inter-generational risk-sharing features. Employers are not subject to investment and longevity risks as these are transferred to plan members collectively. In this paper, we discuss policy related to the proposed introduction of CDC schemes to the UK. By means of a simulation-based study, we compare the performance of CDC schemes vis-à-vis typical Defined Contribution schemes under different investment strategies. We find that CDC schemes may provide retirees with a higher income replacement rate on average, together with less uncertainty.

scholarly journals Alpha-robust mean-variance investment strategy for DC pension plan with uncertainty about jump-diffusion risk

2020 ◽  
Author(s):  
Danping Li ◽  
Junna BI ◽  
Mengcong Hu
Keyword(s):  
Ambiguity Aversion ◽  
Pension Plan ◽  
Optimal Investment ◽  
Jump Diffusion ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Value Functions ◽  
Defined Contribution ◽  
Optimal Investment Problem ◽  
Mean Variance

This paper considers an alpha-robust optimal investment problem for a defined contribution (DC) pension plan with uncertainty about jump and diffusion risks in a mean-variance framework. Our model allows the pension manager to have different levels of ambiguity aversion, rather than only consider the extremely ambiguity-averse attitude. Moreover, in the DC pension plan, contributions are supposed to be a predetermined amount of money as premiums and the pension funds are allowed to be invested in a financial market which consists of a risk-free asset, and a risky asset satisfying a jump-diffusion process. Notice that a part of pension members could die during the accumulation phase, and their premiums should be withdrawn. Thus, we consider the return of premiums clauses by an actuarial method and assume that the surviving members will share the difference between the return and the accumulation equally. Taking account of the pension fund size and the volatility of the accumulation, a mean-variance criterion as the investment objective for the DC plan can be formulated. By applying a game theoretic framework, the equilibrium investment strategies and the corresponding equilibrium value functions can be obtained explicitly. Economic interpretations are given in the numerical simulation, which is presented to illustrate our results.

PORTFOLIO INSURANCE STRATEGIES FOR A TARGET ANNUITIZATION FUND

2020 ◽  
Vol 50 (3) ◽  
pp. 873-912
Author(s):  
Mengyi Xu ◽  
Michael Sherris ◽  
Adam W. Shao
Keyword(s):  
Optimal Investment ◽  
Retirement Income ◽  
Investment Strategies ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Minimum Level ◽  
Portfolio Insurance ◽  
Constant Proportion ◽  
Prior Literature ◽  
Risk Protection

AbstractThe transition from defined benefit to defined contribution (DC) pension schemes has increased the interest in target annuitization funds that aim to fund a minimum level of retirement income. Prior literature has studied the optimal investment strategies for DC funds that provide minimum guarantees, but far less attention has been given to portfolio insurance strategies for DC pension funds focusing on retirement income targets. We evaluate the performance of option-based and constant proportion portfolio insurance strategies for a DC fund that targets a minimum level of inflation-protected annuity income at retirement. We show how the portfolio allocation to an equity fund varies depending on the member’s age upon joining the fund, displaying a downward trend through time for members joining the fund before ages in the mid-30s. We demonstrate how both portfolio insurance strategies provide strong protection against downside equity risk in financing a minimum level of retirement income. The option-based strategy generally leads to higher accumulated savings at retirement, whereas the constant proportion strategy provides better downside risk protection robust to equity market jumps/volatilities.

scholarly journals On the Effect of Inflation and Impact of Hedging on Pension Wealth Generation Strategies under the Geometric Brownian Motion Model

2019 ◽  
pp. 119-142
Author(s):  
Bright O. Osu ◽  
Kevin N. C. Njoku ◽  
Ben I. Oruh
Keyword(s):  
Utility Function ◽  
Pension Reform ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Pension Scheme ◽  
Investment Strategies ◽  
Defined Contribution ◽  
Plan Member ◽  
The Impact ◽  
Pension Wealth

This work investigates the effect of Inflation and the impact of hedging on the optimal investment strategies for a prospective investor in a DC pension scheme, using inflation-indexed bond and inflation-linked stock. The model used here permits the plan member to make a defined contribution, as provided in the Nigerian Pension Reform Act of 2004. The pension plan member is allowed to invest in risk-free asset (cash), and two risky assets (i.e., the inflation-indexed bond and inflation-linked stock). A stochastic differential equation of the pension wealth that takes into account certain agreed proportions of the plan member’s salary, paid as contribution towards the pension fund, is constructed and presented. The Hamilton-Jacobi-Bellman (H-J-B) equation, Legendre transformation, and dual theory are used to obtain the explicit solution of the optimal investment strategies for CRRA utility function. Our investigation reveals that the inflation have significant negative effect on wealth investment strategies, particularly, the RRA(w) is not constant with the investment strategy, since the inflation parameters and coefficient of CRRA utility function have insignificant input on the investment strategies, and also the inflation-indexed bond and inflation-linked stock has a positive damping effect (hedging) on the severe effect of inflation.

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