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Decision making by pension fund trustees in the face of demographic and economic shocks: a vignette study

Dalen van, H.P. and Henkens, C.J.I.M. and Koedijk, C.G. and Slager, A. (2012) Decision making by pension fund trustees in the face of demographic and economic shocks: a vignette study. Journal of Pension Economics and Finance, 11, 183-201. ISSN 1474-7472.

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Official URL: http://dx.doi.org/10.1017/S1474747211000631

Abstract

How do pension fund trustees deal with demographic and economic shocks? We examine this issue by using a vignette study among pension fund trustees in the Netherlands. Trustees show asymmetric reactions to shocks in the level of reserves of pension funds. Pension premiums are upwardly flexible but trustees are reluctant to decrease premiums. Asymmetries are also revealed by choices regarding the inflation indexation of benefits and changing real (defined) benefits. Asymmetry is not visible in the policy responses to demographic shocks: increases in life expectancy are reflected by taking structural measures for a defined benefit contract: raising pension premiums and the pension age. Furthermore, trustees allow their choices to be affected by the forces of social comparison: the reserve position of their fund compared to the position of other funds has a significant influence in choosing pension fund policy instruments. Keywords: pension funds; finance; governance; behavioural economics.

Item Type:Article
Institutes:Ned. Interdisc. Demografisch Instituut (NIDI)
ID Code:10226
Deposited On:17 Mar 2012 01:00
Last Modified:21 May 2013 13:28

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