Abstract
This paper models policy responses to changes in solvency by Dutch
occupational pension funds using a unique panel dataset containing the
balance sheets of all registered pension funds in the Netherlands over a period
of 15 years (1993–2007). The model describes how nominal pension rights are
expanded, by e.g. indexation or backservice, or, on the contrary, how the
current pension accumulation is skimmed, e.g. by setting the pension premium
over its actuarially fair price to build buffers. Policy responses are explained by
the funding ratio and other pension fund characteristics such as pension funds´
size and type, and participants’ ages. We find that pension rights are expanded
in line with the funding ratio, but that the pension funds’ response function
exhibits two sharp and significant behavioural breaks, close to the minimum
funding ratio of 105% and the target ratio of around 125%. These levels also
play a pivotal role in current supervisory regulation. We further find that large
pension funds and grey funds are relatively generous to participants.
occupational pension funds using a unique panel dataset containing the
balance sheets of all registered pension funds in the Netherlands over a period
of 15 years (1993–2007). The model describes how nominal pension rights are
expanded, by e.g. indexation or backservice, or, on the contrary, how the
current pension accumulation is skimmed, e.g. by setting the pension premium
over its actuarially fair price to build buffers. Policy responses are explained by
the funding ratio and other pension fund characteristics such as pension funds´
size and type, and participants’ ages. We find that pension rights are expanded
in line with the funding ratio, but that the pension funds’ response function
exhibits two sharp and significant behavioural breaks, close to the minimum
funding ratio of 105% and the target ratio of around 125%. These levels also
play a pivotal role in current supervisory regulation. We further find that large
pension funds and grey funds are relatively generous to participants.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 23 |
| Publication status | Published - 2011 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 15 |
| Volume | 11 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- pension funds
- pension rights
- risk sharing instruments
- indexation
- funding ratio
- solvability
- regime shifts