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Decision making by pension fund trustees in the face of demographic and economic shocks: a vignette study*

Published online by Cambridge University Press:  14 November 2011

Tilburg School of Economics and Management and CentER, Tilburg University Netherlands Interdisciplinary Demographic Institute (NIDI), The Hague
Netherlands Interdisciplinary Demographic Institute (NIDI), The Hague Department of Sociology and Netspar, Tilburg University
Tilburg School of Economics and Management and CentER, Tilburg University Centre for Economic Policy Research (CEPR), London
Tilburg School of Economics and Management, TiasNimbas Business School and CentER, Tilburg University


How do pension fund trustees deal with demographic and economic shocks? We examine this issue by using a vignette study among pension fund trustees in the Netherlands. Trustees show asymmetric reactions to shocks in the level of reserves of pension funds. Pension premiums are upwardly flexible but trustees are reluctant to decrease premiums. Asymmetries are also revealed by choices regarding the inflation indexation of benefits and changing real (defined) benefits. Asymmetry is not visible in the policy responses to demographic shocks: increases in life expectancy are reflected by taking structural measures for a defined benefit contract: raising pension premiums and the pension age. Furthermore, trustees allow their choices to be affected by the forces of social comparison: the reserve position of their fund compared to the position of other funds has a significant influence in choosing pension fund policy instruments.

Copyright © Cambridge University Press 2011

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Comments by Gordon Clark and two anonymous referees are gratefully acknowledged.


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