Resource title

Pension benefit insurance and pension plan portfolio choice

Resource image

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Resource description

Pension benefit guarantee policies have been introduced in several countries to protect private pension plan members from the loss of income that would occur if a plan was underfunded when the sponsoring firm terminates a plan. Most of these public insurance schemes face financial difficulty and consequently policy reforms are being discussed or implemented. Economic theory suggests that such schemes will face moral hazard and adverse selection problems. In this note we test a specific theoretical prediction: insured plans will invest more heavily in risky assets. Our test exploits differences in insurance arrangements across Canadian jurisdictions. We find that insured plans invest about 5 percent more in equities than do similar plans without benefit guarantees.

Resource author

Thomas F. Crossley, Mario Jametti

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26543

Resource license

Adapt according to the presented license agreement and reference the original author.