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Life-cycle patterns in the design and adoption of default funds in DC pension plans

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  • INKMANN, JOACHIM
  • SHI, ZHEN

Abstract

We argue that we should see a negative relationship between the share of risky assets in the default fund of a defined contribution (DC) pension plan and the average plan member age if trustees design the default fund in line with predictions from the life-cycle portfolio choice theory. Adoption of the default fund should be low in DC plans with high member age dispersion if default funds are indeed designed for the average plan member and members become aware of this. From analyzing a panel dataset of Australian DC pension plans, we obtain results that are consistent with both hypotheses.

Suggested Citation

  • Inkmann, Joachim & Shi, Zhen, 2016. "Life-cycle patterns in the design and adoption of default funds in DC pension plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 15(4), pages 429-454, October.
    • Handle: RePEc:cup:jpenef:v:15:y:2016:i:04:p:429-454_00
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    Cited by:

    1. Yaniv Azoulay & Andrey Kudryavtsev & Shosh Shahrabani, 2016. "Accumulating approach to the life-cycle pension model: practical advantages," Financial Theory and Practice, Institute of Public Finance, vol. 40(4), pages 413-436.

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