The Promise of Defined Ambition Plans: Lessons for the United States
Published in Mitchell, O. and R. Shea (Eds.) (2016). Reimagining Pensions: The Next 40 Years. Oxford, UK: Oxford University Press.
Posted: 14 Nov 2014 Last revised: 3 Apr 2020
Date Written: September 1, 2014
Abstract
We explore Dutch proposals for defined ambition plans in an occupational pension context. Firms no longer act as external risk sponsors but continue to provide a distributional platform for pensions, thereby addressing behavioral and agency issues as well as imperfections of insurance and financial markets. Pension entitlements are defined in terms of (deferred) annuities, and participants share the risks of assets and a joint liability pool on the basis of complete contracts. We investigate risk management and valuation of these plans, explore their strengths and weaknesses, and analyze whether such plans hold promise for the United States.
Keywords: Defined ambition, variable annuity, valuation, risk profile, risk management, liabilities, consumption frame
Suggested Citation: Suggested Citation
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