Optimal Investment for Retirement with Intergenerational Benchmarking
By Luke Servat & Antoon Pelsser Countries have demonstrated a tendency to switch their second pillar toward defined contribution plans, increasing the market-sensitivity of pensions. This can lead to large differences across generations within a pension fund, as otherwise similar cohorts may experience different market conditions during accumulation. In this paper, we investigate how each cohort should invest if the goal is to reduce the likelihood of unlucky generations, in the presence of equity, interest-rate and annuity-conversion risk. We do...
