IDEAS home Printed from https://ideas.repec.org/p/ifs/ifsewp/95-05.html
   My bibliography  Save this paper

The choice of private pension plans under uncertainty

Author

Listed:
  • Agar Brugiavini

    () (Institute for Fiscal Studies and University of Venice)

  • Richard Disney

    () (Institute for Fiscal Studies and University of Sussex)

Abstract

Individuals in the UK now face an effective choice between joining different types of pension plan. We model this choice in a life cycle utility- maximising framework, for risk averse individuals. It is assumed that no pension plan can guarantee every individual a fair annuity at the risk-free rate of interest. By opting for a 'defined contribution' (money purchase) pension, the individual is assumed to incur investment risk (uncertainty of outcome in the capital market). By opting for a final salary based 'defined benefit' plan, the individual incurs a risk of reduced pension rights associated with job turnover. Assuming that the expected return to the two plans is identical, and equal to the risk free rate of interest, utilities are evaluated consequent upon choice of pension plan, including mixed strategies, in a multiperiod framework. The sensitivity of utility, and choice of pension arrangement, to variations in the individual risk of job severance, to capital market risk, and to the nature of risk aversion, are examined.

Suggested Citation

  • Agar Brugiavini & Richard Disney, 1995. "The choice of private pension plans under uncertainty," IFS Working Papers W95/05, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:95/05
    as

    Download full text from publisher

    File URL: http://www.ifs.org.uk
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert Jahoda & Jiøí Špalek, 2009. "Pension Reform through Voluntary Opt-Out: The Czech Case," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(4), pages 309-333, Oktober.
    2. Richard Disney & Carl Emmerson & Sarah Smith, 2004. "Pension Reform and Economic Performance in Britain in the 1980s and 1990s," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 233-274 National Bureau of Economic Research, Inc.
    3. James Banks & Carl Emmerson, 2000. "Public and private pension spending: principles, practice and the need for reform," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 1-63, March.
    4. Richard Disney, 1995. "Occupational pension schemes: prospects and reforms in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 19-39, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:95/05. 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: (Emma Hyman). General contact details of provider: http://edirc.repec.org/data/ifsssuk.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.