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Optimal investment policies for hybrid pension plans : analyzing the perspective of sponsors and members

Author

Listed:
  • Albrecht, Peter
  • Coche, Joachim
  • Maurer, Raimond
  • Rogalla, Ralph

Abstract

This paper analyzes investment strategies in the context of alternative hybrid pension plans which are optimal either from the perspective of the plan sponsor or the beneficiaries. The focus is in particular on how the introduction of minimum and maximum limits for pension benefits as well as minimum guarantees and caps on the return of the members’ individual investment accounts affect the investment decision. The study finds that portfolio choice of sponsor and beneficiaries shows substantial differences depending on the exact plan design and the beneficiaries’ risk aversion. The introduction of caps on investment returns emerged a possible means to reduce such differences and to share investment risks and returns more equally between sponsor and beneficiaries.

Suggested Citation

  • Albrecht, Peter & Coche, Joachim & Maurer, Raimond & Rogalla, Ralph, 2005. "Optimal investment policies for hybrid pension plans : analyzing the perspective of sponsors and members," Papers 05-28, Sonderforschungsbreich 504.
    • Handle: RePEc:mnh:spaper:2643
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    File URL: https://madoc.bib.uni-mannheim.de/2643/1/dp05_28.pdf
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    References listed on IDEAS

    as
    1. Zvi Bodie & Alan J. Marcus & Robert C. Merton, 1988. "Defined Benefit versus Defined Contribution Pension Plans: What are the Real Trade-offs?," NBER Chapters, in: Pensions in the U.S. Economy, pages 139-162, National Bureau of Economic Research, Inc.
    2. Bacinello, Anna Rita, 2000. "Valuation of contingent-claims characterising particular pension schemes," Insurance: Mathematics and Economics, Elsevier, vol. 27(2), pages 177-188, October.
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    More about this item

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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