Pension Liability Measurement and Intergenerational Fairness: Two Case Studies

10 Pages Posted: 18 May 2012

Date Written: Spring 2012


This article shows how valuation techniques for pension liabilities in risk-sharing pension plans affect the distribution of wealth between generations. Some techniques in use today underestimate liabilities and benefit current retirees at the expense of other plan stakeholders, undermining the sustainability of risk-sharing pension plans by shifting concealed deficits to future generations. The liability valuation techniques of state and local pension plans in the United States and those recently proposed in the Netherlands for its Collective Defined Contribution pension system are two examples. The article shows that these techniques are not “arbitrage free,” meaning that their intergenerational wealth-distribution effects are deeply damaging.

Keywords: Arbitrage-Free Valuation, Collective Defined Contribution, Intergenerational Distribution, Liability Accounting, Pension Fund

Suggested Citation

Kocken, Theo P., Pension Liability Measurement and Intergenerational Fairness: Two Case Studies (Spring 2012). Rotman International Journal of Pension Management, Vol. 5, No. 1, p. 16, 2012, Available at SSRN:

Theo P. Kocken (Contact Author)

Cardano Risk Management ( email )

Beurs World Trade Centre, 11th Floor
Beursplein 37
Rotterdam 3011 AA
+31-10-2434747 (Phone)
+31-10-4660907 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics