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 Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 223.
Date of creation: 24 Apr 2009
Date of revision:
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," Economics Working Papers ECO2009/18, European University Institute.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-05-02 (Economics of Ageing)
- NEP-ALL-2009-05-02 (All new papers)
- NEP-HEA-2009-05-02 (Health Economics)
- NEP-IAS-2009-05-02 (Insurance Economics)
- NEP-LAB-2009-05-02 (Labour Economics)
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