Recovery Measures of Underfunded Pension Funds: Higher Contributions, No Indexation, or Pension Cuts?

40 Pages Posted: 2 Nov 2015

Multiple version iconThere are 2 versions of this paper

Date Written: October 28, 2015

Abstract

Using recovery plan data of 213 underfunded Dutch pension funds for the years 2011, 2012 and 2013, discrete choice models are estimated describing pension funds’ choices between three recovery measures: higher contributions, no indexation, and pension cuts. The estimation results suggest, firstly, that pension cuts are more likely when the funding ratio is very low, there is little time left for recovery, the pension fund is not a corporate pension fund, and its participants are still relatively young. Secondly, the results suggest that Dutch pension funds consider contribution increase first, no indexation second, and pension cuts only as a last resort.

Keywords: pension funds, funding ratio, regulation, recovery plans

JEL Classification: G23, G28, G32

Suggested Citation

de Haan, Leo, Recovery Measures of Underfunded Pension Funds: Higher Contributions, No Indexation, or Pension Cuts? (October 28, 2015). De Nederlandsche Bank Working Paper No. 485. Available at SSRN: https://ssrn.com/abstract=2683369 or http://dx.doi.org/10.2139/ssrn.2683369

Leo de Haan (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31 20 5243539 (Phone)
+31 20 5242514 (Fax)

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