Lessons of the Financial Crisis for the Design of National Pension Systems
AbstractThe recent financial crisis and the historical record suggest important lessons about the design of national pension systems. First, wide fluctuations in asset returns make it hard for well-informed savers to select a saving rate or a sensible investment strategy for defined-contribution (DC) pensions. Workers who follow identical investment strategies but who retire a few years apart can receive DC pensions that are startlingly unequal. Second, it is hard for ordinary workers, as opposed to optimal planners, to make sensible choices about portfolio allocation. Their investment errors mean that actual returns fall short of the theoretical returns that could be earned by well-informed, disciplined investors. (JEL codes: G01, G11, H55 and J26) Copyright The Author 2010. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: firstname.lastname@example.org, Oxford University Press.
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Bibliographic InfoArticle provided by CESifo in its journal CESifo Economic Studies.
Volume (Year): 56 (2010)
Issue (Month): 3 (September)
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Other versions of this item:
- Gary Burtless, 2009. "Lessons of the Financial Crisis for the Design of National Pension Systems," CESifo Working Paper Series 2735, CESifo Group Munich.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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