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Risk Shifting Versus Risk Management - Canadian Pension Plan Liability Discount Rates

Author

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  • Sally Shen
  • Serguei Zernov

Abstract

This paper studies the choice of parameters of the pension plan design and investment strategies in the context of the regulatory environment and their institutional organization. Our objective is to infer whether these choices are driven by preferences of the pension plan members or by opportunities for unfair risk transfers that are possible thanks to perverse regulatory incentives. Empirical findings indicate that discount rates chosen by both the Canadian public and private pension plans are a reflection of risk preferences rather than of regulatory structure or political incentives.

Suggested Citation

  • Sally Shen & Serguei Zernov, 2023. "Risk Shifting Versus Risk Management - Canadian Pension Plan Liability Discount Rates," Canadian Public Policy, University of Toronto Press, vol. 49(1), pages 76-93, March.
    • Handle: RePEc:cpp:issued:v:49:y:2023:i:1:p:76-93
    DOI: 10.3138/cpp.2021-095
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    More about this item

    Keywords

    discount rate; risk shifting; pension funds; liability; asset allocation; regulatory incentives;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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