Evaluating the Financial Performance of Pension Funds
Since the early 1980s, the structure of arrangements to provide retirement income has gradually moved from defined benefit (DB) systems to various types of arrangements in which the provision of pensions is backed by assets, either in individual accounts or in collective schemes. This change has been motivated principally by governments seeking to lessen the fiscal impact of aging populations and to diversify the sources of retirement income. One of the key results is that many pension systems are now in the process of becoming asset backed. This increasingly links retirement incomes to the performance of these assets, resulting in participants being exposed to the uncertainties of investment markets to determine the level of benefits that they will ultimately receive. The potential consequences of this have never been more evident than during the recent global financial crisis. This introductory chapter provides an overview of the issues and motivation for this work and summarizes the studies that were conducted and their main findings. It concludes with policy-related observations that arise from the overall consideration of the research program. The remainder of the volume contains a selection of the studies undertaken through the partnership that focus on developing approaches to evaluate performance of pension funds and concludes with observations and commentary from four noted experts in the field on the issues raised by this work and the interpretation of the findings.
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- Zvi Bodie & Jérôme Detemple & Marcel Rindisbacher, 2009. "Life-Cycle Finance and the Design of Pension Plans," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 249-286, November.
- Zvi Bodie & Doriana Ruffino & Jonathan Treussard, 2008. "Contingent Claims Analysis and Life-Cycle Finance," American Economic Review, American Economic Association, vol. 98(2), pages 291-296, May.
- Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.