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

TY - JOUR

T1 - Decision making by pension fund trustees in the face of demographic and economic shocks: a vignette study

AU - van Dalen, H.P.

AU - Henkens, C.J.I.M.

AU - Koedijk, C.G.

AU - Slager, A.

N1 - Reporting year: 2012

PY - 2012

Y1 - 2012

N2 - 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. Keywords: pension funds; finance; governance; behavioural economics.

AB - 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. Keywords: pension funds; finance; governance; behavioural economics.

U2 - 10.1017/S1474747211000631

DO - 10.1017/S1474747211000631

M3 - Article

SN - 1474-7472

VL - 11

SP - 183

EP - 201

JO - Journal of Pension Economics and Finance

JF - Journal of Pension Economics and Finance

IS - 2

ER -