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Fair Transition from Defined Benefit to Target Benefit

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Transition_ASTIN.pdf (812.7 KB)

Date

2021

Authors

Zhu, Xiaobai
Hardy, Mary
Saunders, David

Journal Title

Journal ISSN

Volume Title

Publisher

Cambridge University Press

Abstract

Target benefit (TB) plans that incorporate intergenerational risk sharing have been demonstrated to be welfare improving over the long term. However, there has been little discussion of the short-term benefits for members in a defined benefit (DB) plan that is transitioning to TB. In this paper, we adopt a two-step approach that is designed to ensure the long-term sustainability of the new plan, without unduly sacrificing the benefit security of current retirees. We propose a cohort-based transition plan for reducing intergenerational inequity. Our study is based on simulations using an economic scenario generator with some theoretical results under simplified settings.

Description

This article has been published in a revised form in ASTIN Bulletin https://doi.org/10.1017/asb.2021.17. This version is free to view and download for private research and study only. Not for re-distribution, re-sale or use in derivative works. © The Authors, 2021.

Keywords

pensions, intergenerational risk sharing, target benefit plan, fairness

LC Keywords

Citation

URI

https://doi.org/10.1017/asb.2021.17
 http://hdl.handle.net/10012/20092

Collections

Waterloo Research