A disadvantage of defined contribution schemes, like those in the new Dutch pension deal, is the considerable uncertainty about pension capital at retirement. This is caused by the investment strategies used, which maximise the return with a constant relative risk aversion. This study explored the impact of using a non-constant relative risk aversion, which allows investment strategies that explicitly try to achieve the benchmark pension capital at retirement. We found that this approach gives a high chance of obtaining the desired benchmark, thereby reducing participants’ uncertainty about their pension income.
|Place of Publication||Tilburg|
|Publication status||Published - 2020|
|Name||Netspar Design Paper|