Can internal swap markets enhance welfare in defined contribution plans?

J. Cui, E.H.M. Ponds

Research output: Contribution to journalArticleScientificpeer-review

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Abstract

There is a worldwide trend to substitute defined contribution pension plans for defined benefit plans, which are typically indexed to wage or price inflation. A problem with this development is that participants in defined contribution plans have limited access or no access at all to inflation-linked assets, especially wage inflation-linked claims. This article demonstrates that the creation of an internal market that swaps equity-related returns for wage inflation-linked income streams helps to overcome the market incompleteness regarding wage-linked securities. The result is an improvement in the welfare of both younger and older defined contribution plan members.
Original languageEnglish
Pages (from-to)52-58
JournalRotman International Journal of Pension Management
Volume33
Issue number2
Publication statusPublished - 2010

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