IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

What drives pension indexation in turbulent times? An empirical examination of Dutch pension funds

  • Dirk Broeders
  • Paul Hilbers
  • David Rijsbergen
Registered author(s):

    This paper identifies the key factors driving indexation in turbulent economic times within defined benefit plans using a unique panel dataset of 166 Dutch pension funds from 2007 to 2010. Key drivers of indexation are the funding ratio, inflation and real wage growth. The type of pension fund and the interest rate exposure are also statistically significant, although the latter effect is nonlinear. The asset allocation has no significant effect on the level of provided indexation as this is already captured by the funding ratio. We also examine the relation between policy ladders and the actual level of provided indexation. This study finds that a policy ladder with an upper limit equal to a 100 percent real funding ratio is able to predict the actual level of indexation more accurately than a ladder with an upper limit based on a pension fund's required funding ratio.

    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.dnb.nl/en/binaries/working%20Paper%20368_tcm47-283912.pdf
    Download Restriction: no

    Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 368.

    as
    in new window

    Length:
    Date of creation: Jan 2013
    Date of revision:
    Handle: RePEc:dnb:dnbwpp:368
    Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
    Web page: http://www.dnb.nl/en/

    More information through EDIRC

    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. Roel Beetsma & Alessandro Bucciol, 2011. "Differentiating Indexation in Dutch Pension Funds," De Economist, Springer, vol. 159(3), pages 323-360, September.
    2. Robert C. Merton, 1982. "On Consumption-Indexed Public Pension Plans," NBER Working Papers 0910, National Bureau of Economic Research, Inc.
    3. Ponds, E.H.M. & van Riel, B., 2009. "Sharing risk : The Netherlands' new approach to pensions," Other publications TiSEM dffdb2a2-5a3c-45e1-b166-c, School of Economics and Management.
    4. Jan de Dreu & Jacob Bikker, 2009. "Pension fund sophistication and investment policy," DNB Working Papers 211, Netherlands Central Bank, Research Department.
    5. J.A. Bikker & T. Knaap & W.E. Romp, 2011. "Real Pension Rights as a Control Mechanism for Pension Fund Solvency," Working Papers 11-15, Utrecht School of Economics.
    6. repec:ner:tilbur:urn:nbn:nl:ui:12-3129589 is not listed on IDEAS
    7. Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, number 9780198296942.
    8. Shaun K. Roache & Alexander P. Attie, 2009. "Inflation Hedging for Long-Term Investors," IMF Working Papers 09/90, International Monetary Fund.
    9. Cui, Jiajia & Jong, Frank De & Ponds, Eduard, 2011. "Intergenerational risk sharing within funded pension schemes," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(01), pages 1-29, January.
    10. Ponds, Eduard H. M. & Riel, Bart Van, 2009. "Sharing risk: the Netherlands' new approach to pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(01), pages 91-105, January.
    11. J.A. Bikker, 2013. "Is there an optimal pension fund size? A scale-economy analysis of administrative and investment costs," Working Papers 13-06, Utrecht School of Economics.
    12. Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992. "Labor supply flexibility and portfolio choice in a life cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 427-449.
    13. Gordon L Clark & Paul Bennett, 2001. "Dutch sector-wide supplementary pensions: fund governance, European competition policy, and the geography of finance," Environment and Planning A, Pion Ltd, London, vol. 33(1), pages 27-48, January.
    14. Bikker, Jacob A. & De Dreu, Jan, 2009. "Operating costs of pension funds: the impact of scale, governance, and plan design," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(01), pages 63-89, January.
    15. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    16. Jacob A Bikker & Peter J G Vlaar, 2007. "Conditional Indexation in Defined Benefit Pension Plans in the Netherlands*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 32(4), pages 494-515, October.
    17. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-70, May.
    18. Jacob A. Bikker & Dirk W.G.A. Broeders & David A. Hollanders & Eduard H.M. Ponds, 2009. "Pension funds' asset allocation and participant age: a test of the life-cycle model," DNB Working Papers 223, Netherlands Central Bank, Research Department.
    19. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated," Journal of Finance, American Finance Association, vol. 62(5), pages 2123-2167, October.
    20. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio choice over the life-cycle when the stock and labor markets are cointegrated," Working Paper Series WP-07-11, Federal Reserve Bank of Chicago.
    21. Veall, Michael R & Zimmermann, Klaus F, 1994. "Goodness of Fit Measures in the Tobit Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(4), pages 485-99, November.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:368. 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: (Rob Vet)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.