Pension Risk, Retirement Saving and Insurance
AbstractUsing a representative sample of Italian investors, we estimate the risk associated with pension benefits by eliciting for each individual the subjective distribution of the replacement rate as a summary indicator of social security wealth. We find substantial heterogeneity of pension risk and show that it is consistently related to observable features in the pension system that have different effects on individuals with different characteristics. We then relate subjective pension risk to individuals’ financial decisions. We find that people try to attenuate the adverse consequences of pension wealth uncertainty by increasing demand for targeted retirement saving and for insurance. Individuals facing more pension wealth risk tend to enroll more often in private pension funds, invest more in life insurance and buy more private health insurance. These effects are consistent with people becoming more risk-averse when pension wealth becomes less predictable, leading them to search for greater financial security.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2009/18.
Date of creation: 2009
Date of revision:
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Pension Risk; Retirement Saving; Insurance;
Other versions of this item:
- Luigi Guiso & Tullio Jappelli & Mario Padula, 2009. "Pension Risk, Retirement Saving and Insurance," EIEF Working Papers Series 0902, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2009.
- Luigi Guiso & Tullio Jappelli & Mario Padula, 2009. "Pension Risk, Retirement Saving and Insurance," CSEF Working Papers 223, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-07-03 (Economics of Ageing)
- NEP-ALL-2009-07-03 (All new papers)
- NEP-IAS-2009-07-03 (Insurance Economics)
- NEP-LAB-2009-07-03 (Labour Economics)
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