Demystifying Pension Design: Clearer Principles Foster Better Practices

7 Pages Posted: 17 Sep 2014

See all articles by Thomas Galen

Thomas Galen

VU University Amsterdam; Cardano Risk Management

Theo Kocken

Cardano Risk Management

Stefan Lundbergh

Cardano Risk Management

Date Written: September 17, 2014

Abstract

Discussions of pension system design are often difficult to follow, especially when tradeoffs between various system design features are obscured by complicated technical arguments. This article sets out to demystify these discussions by presenting nine guiding principles which ideally shape the key features of any pension system. These principles must cover three design dimensions: human behavior, system stability, and how risks are borne in the system. The article concludes by showing how the application of these principles to the pension systems of the United Kingdom, Sweden, and the Netherlands can clarify the pension design challenges these countries are currently facing, and how implicit design tradeoffs can be made explicit.

Keywords: Behavioral Economics, Pension Design, Pension Fund, Risk Management, Risk Sharing

Suggested Citation

Galen, Thomas and Kocken, Theo and Lundbergh, Stefan, Demystifying Pension Design: Clearer Principles Foster Better Practices (September 17, 2014). Rotman International Journal of Pension Management, Vol. 7, No. 2, 2014, Available at SSRN: https://ssrn.com/abstract=2497524 or http://dx.doi.org/10.2139/ssrn.2497524

Thomas Galen (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Cardano Risk Management ( email )

Rotterdam 3011 AA
Netherlands

Theo Kocken

Cardano Risk Management ( email )

Rotterdam 3011 AA
Netherlands

Stefan Lundbergh

Cardano Risk Management ( email )

Rotterdam 3011 AA
Netherlands

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