Designing the pension system: Conceptual framework

A.L. Bovenberg, C. van Ewijk

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review


This paper develops an analytical framework for the design of pension systems, taking the functions of the pension system as the guiding principle. It discusses the economic principles underlying these functions and their implementation in practice. In particular, it distinguishes three functions: facilitating life-cycle financial planning; insuring idiosyncratic risks and sharing macroeconomic risks across generations. The first function concerns consumption smoothing over the life cycle, taking into account individual circumstances and preferences. The second function concerns pooling of intragenerational risks in the face of imperfect insurance markets. The third function concerns intergenerational risk sharing of systemic or ‘macroeconomic’ shocks in the face of incomplete markets. As regards the latter function, the relevant market imperfections are the limited tradability of human capital and the lack of markets to trade risks with future generations.
Original languageEnglish
Title of host publicationThe Future of Multi-Pillar Pension Systems
EditorsA.L. Bovenberg, C. van Ewijk, E. Westerhout
Place of PublicationCambridge
PublisherCambridge University Press
Number of pages436
ISBN (Print)9781107022263
Publication statusPublished - 2012


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