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Lifetime investment and consumption using a defined-contribution pension scheme

  • Emms, Paul
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    During the accumulation phase of a defined-contribution pension scheme, a scheme member invests part of their stochastic income in a portfolio of a stock and a bond in order to build up sufficient funds for retirement. It is assumed that the remainder of their salary pre-retirement is consumed, an annuity is purchased at retirement, and the stock allocation and consumption pre-retirement maximise the total expected lifetime consumption using a CARA utility function. Perfect correlation between the scheme member's income and the stock price leads to analytical expressions for the controls for a general income model. If the correlation is imperfect then analytical controls are found for two particular stochastic income models.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165188912000279
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    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 36 (2012)
    Issue (Month): 9 ()
    Pages: 1303-1321

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    Handle: RePEc:eee:dyncon:v:36:y:2012:i:9:p:1303-1321
    Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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