Abstract
The current redesign of the Dutch pension system includes the following elements: a
dened contribution pension for each participant plus a solidarity buffer that serves
as a risk-sharing mechanism to smooth returns between participants in the pension
fund. In this paper we briefly summarize the literature on optimal risk sharing. We
also assess the welfare effects of the current Dutch pension proposal and compare
this to theoretically optimal risk sharing arrangements. We show that a solidarity
buffer with sufciently risky investment can achieve results that approximate the
optimal utility benets of “unconstrained” intergenerational risk sharing.
dened contribution pension for each participant plus a solidarity buffer that serves
as a risk-sharing mechanism to smooth returns between participants in the pension
fund. In this paper we briefly summarize the literature on optimal risk sharing. We
also assess the welfare effects of the current Dutch pension proposal and compare
this to theoretically optimal risk sharing arrangements. We show that a solidarity
buffer with sufciently risky investment can achieve results that approximate the
optimal utility benets of “unconstrained” intergenerational risk sharing.
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | NETSPAR |
| Number of pages | 32 |
| Publication status | Published - 2020 |
Publication series
| Name | Netspar Design Paper |
|---|---|
| Publisher | Netspar |
| Volume | 166 |