Advanced Search
MyIDEAS: Login

Impacts of Cyclical Downturns on the Third Pillar of the RIS and Policy Responses

Contents:

Author Info

  • Davies, James B.
  • Yu, Xiaoyu

Abstract

This paper explores impacts of recessions on private pensions and retirement savings in Canada. We estimate that the 2008-09 recession saw declines in average family wealth and retirement assets of 11% and 14% respectively. Average wealth recovered by the end of 2010, but retirement assets remained 2% lower than before the recession. Losses were higher for those more exposed to the stock market, such as older workers and retirees with DC pension plans or large RRSPs. Without the recovery the recession would have reduced expected retirement income of future retirees by averages of 3.4% and 11.0% for DB and DC plans respectively. In order to analyze unemployment and early retirement effects, the paper examines a hypothetical economy with a recession once a decade. For DB plans, unemployment caused by recessions can reduce pensions by up to 25% if it strikes late and reduces final average pay. Early retirement may reduce DB pensions up to 50%. Overall, effects tend to be smaller with DC plans, but early career unemployment or early retirement can have substantial impacts. Enhancing CPP/QPP is compared with wide adoption of Pooled RPPs (PRPPs). Expected retirement income is higher with PRPPs but so is risk.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%20113%20-%20Davies%20and%20Yu.pdf
File Function: Main Text
Download Restriction: no

Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2013-20.

as in new window
Length: 72 pages
Date of creation: 29 Apr 2013
Date of revision: 29 Apr 2013
Handle: RePEc:ubc:clssrn:clsrn_admin-2013-20

Contact details of provider:
Web page: http://www.clsrn.econ.ubc.ca/

Related research

Keywords: Pensions; Retirement; Recessions; Income; Assets; Wealth;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Courtney Coile & Phillip B. Levine, 2009. "The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement," NBER Working Papers 15395, National Bureau of Economic Research, Inc.
  2. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
  3. William N. Goetzmann & Alok Kumar, 2001. "Equity Portfolio Diversification," NBER Working Papers 8686, National Bureau of Economic Research, Inc.
  4. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
  5. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2009. "What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population," NBER Working Papers 15435, National Bureau of Economic Research, Inc.
  6. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  7. Larochelle-Cote, Sebastien Myles, John Picot, Garnett, 2008. "Income Security and Stability During Retirement in Canada," Analytical Studies Branch Research Paper Series 2008306e, Statistics Canada, Analytical Studies Branch.
  8. Kevin Milligan, 2005. "Life-cycle asset accumulation and allocation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 1057-1106, August.
  9. Zvi Bodie & Alan J. Marcus & Robert C. Merton, 1985. "Defined Benefit versus Defined Contribution Pension Plans: What are the Real Tradeoffs?," NBER Working Papers 1719, National Bureau of Economic Research, Inc.
  10. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
  11. Mark J. Kamstra & Robert J. Shiller, 2009. "The Case for Trills: Giving the People and Their Pension Funds a Stake in the Wealth of the Nation," Cowles Foundation Discussion Papers 1717, Cowles Foundation for Research in Economics, Yale University.
  12. Dean Baker & David Rosnick, 2008. "The Impact of the Housing Crash on Family Wealth," CEPR Reports and Issue Briefs 2008-20, Center for Economic and Policy Research (CEPR).
  13. William B.P. Robson, 2011. "Don’t Double Down on the CPP: Expansion Advocates Understate the Plan’s Risks," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 137, June.
  14. Eric M. Engen & William G. Gale & Cori E. Uccello, 2005. "Effects Of Stock Market Fluctuations On The Adequacy Of Retirement Wealth Accumulation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(3), pages 397-418, 09.
  15. Sébastien LaRochelle-Côté & John Myles & Garnett Picot, 2008. "Income Security and Stability During Retirement in Canada," Social and Economic Dimensions of an Aging Population Research Papers 236, McMaster University.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ubc:clssrn:clsrn_admin-2013-20. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vivian Tran).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.