Fair Transition from Defined Benefit to Target Benefit
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Date
2021
Authors
Zhu, Xiaobai
Hardy, Mary
Saunders, David
Advisor
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