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Pension Benefit Insurance and Pension Plan Portfolio Choice

Thomas F. Crossley1,2; Mario Jametti3

1 Institute for Fiscal Studies · 2 University of Cambridge · 3 Università della Svizzera italiana

The Review of Economics and Statistics 2013

Pension benefit guarantees have been introduced in several countries to protect private plan members from the loss of income associated with the termination of an underfunded plan. Most such schemes face financial difficulty. Consequently, policy reforms are being contemplated. Economic theory suggests that such schemes will suffer moral hazard problems. We test a specific theoretical prediction: insured plans will invest more heavily in risky assets. Our test exploits policy differences across Canadian jurisdictions. We find that insured plans invest about 5% more in equities than do similar plans without benefit guarantees.

DOI
10.1162/rest_a_00216
Volume
95 (1)
Pages
337-341
Language
en
Export
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