How good are default investment policies in defined contribution pension plans?

2020 ◽  
pp. 1-21
Author(s):  
Daniel Duque ◽  
David P. Morton ◽  
Bernardo K. Pagnoncelli
Keyword(s):  
Closed Loop ◽  
Pension Plans ◽  
Investment Model ◽  
Defined Contribution ◽  
Central Question ◽  
Investment Policies ◽  
Private And Public ◽  
Overall Performance ◽  
Using Data ◽  
Investment Choices

Abstract Defined contribution (DC) pension plans have been gaining ground in the last 10–20 years as the preferred system for many countries and other agencies, both private and public. The central question for a DC plan is how to invest in order to reach the participant's retirement goals. Given the financial illiteracy of the general population, it is common to offer a default policy for members who do not actively make investment choices. Using data from the Chilean system, we discuss an investment model with fixed contribution rates and compare the results with the existing default policy under multiple objectives. Our results indicate that the Chilean default policy has good overall performance, but specific closed-loop policies have a higher probability of achieving desired retirement goals and can reduce the expected shortfall at retirement.

Transitions from career employment among public- and private-sector workers

2019 ◽  
Vol 18 (04) ◽  
pp. 529-548 ◽  
Author(s):  
Joseph F. Quinn ◽  
Kevin E. Cahill ◽  
Michael D. Giandrea
Keyword(s):  
Public Sector ◽  
Private Sector ◽  
Pension Plans ◽  
Full Time ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Private And Public ◽  
Public And Private Sector ◽  
Career Employment ◽  
Public Sector Workers

AbstractDo the retirement patterns of public-sector workers differ from those in the private sector? The latter typically face a retirement landscape with exposure to market uncertainties through defined-contribution pension plans and private saving. Public-sector workers, in contrast, are often covered by defined-benefit pension plans that encourage retirement at relatively young ages and offer financial security at older ages. We examine how private- and public-sector workers transition from full-time career employment, with a focus on the importance of gradual retirement. To our surprise, we find that the prevalence of continued work after career employment, predominantly on bridge jobs with new employers, is very similar in the two sectors, a result with important implications in a rapidly aging society.

scholarly journals Social Investment, Redistribution or Basic Income? Exploring the Association Between Automation Risk and Welfare State Attitudes in Europe

2021 ◽  
pp. 1-20
Author(s):  
MARIUS R. BUSEMEYER ◽  
ALEXANDER H. J. SAHM
Keyword(s):  
Welfare State ◽  
Technological Change ◽  
European Social Survey ◽  
Welfare States ◽  
Basic Income ◽  
Social Investment ◽  
Market Outcomes ◽  
Social Survey ◽  
Investment Policies ◽  
Using Data

Abstract Rapid technological change – the digitalization and automation of work – is challenging contemporary welfare states. Most of the existing research, however, focuses on its effect on labor market outcomes, such as employment or wage levels. In contrast, this paper studies the implications of technological change for welfare state attitudes and preferences. Compared to previous work on this topic, this paper adopts a much broader perspective regarding different kinds of social policy. Using data from the European Social Survey, we find that individual automation risk is positively associated with support for redistribution, but negatively with support for social investment policies (partly depending on the specific measure of automation risk that is used), while there is no statistically significant association with support for basic income. We also find a moderating effect of the overall size of the welfare state on the micro-level association between risk and preferences.

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