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Investment Regulations and Defined Contribution Pensions


  • Pablo Antolín


  • Sandra Blome
  • David Karim
  • Stéphanie Payet


  • Gerhard Scheuenstuhl
  • Juan Yermo



This paper assesses the impact of different quantitative approaches to regulate investment risk on the retirement income stemming from defined contribution (DC) pension plans. It looks at how such regulations affect the spectrum of investment policies available and, through this channel, how they affect the retirement income that an individual may expect from a DC pension plan. The analysis shows that there is a trade-off between potential retirement income and protection from bad outcomes. Reducing the downside risk on retirement income from DC pension plans requires moving into relatively conservative investment policies where the share of assets allocated to bonds may be quite large. However, this comes at the cost of renouncing potentially higher replacement rates that are attainable but at a higher risk of unfavourable retirement income outcomes. Less risk adverse regulators and supervisors would aim at lower probability requirements as regard the downside risk, which will increase the range of investment policies available and thus the share of riskier assets. Réglementations en matière d'investissements et retraites à cotisations définies Ce document examine l'impact de différentes approches quantitatives en matière de réglementation du risque d'investissement sur le revenu de retraite issu de plans de retraite à cotisations définies. Il étudie dans quelle mesure ces réglementations affectent le spectre des stratégies d'investissement et, par leur intermédiaire, le revenu de retraite qu'un individu peut attendre d‘un plan de retraite à cotisations définies. Cette analyse montre qu‘il existe un compromis entre le revenu de retraite potentiel et la protection contre des évènements défavorables. La réduction du risque de baisse du revenu de retraite issu de plans de retraite à cotisations définies nécessite d‘aller vers des stratégies d‘investissement relativement conservatives, dans lesquelles la part allouée aux obligations peut être assez importante. Cependant, ceci n‘est possible qu‘à condition de renoncer à des taux de remplacement potentiellement plus élevés, qui ne peuvent être atteints qu‘à un niveau de risque plus élevé de survenue d‘évènements défavorables pour le revenu de retraite. Des régulateurs et superviseurs moins averses au risque peuvent diminuer leurs exigences en terme de probabilité du risque de baisse, ce qui augmentera la gamme des stratégies d‘investissement disponibles et ainsi la part des actifs plus risqués.

Suggested Citation

  • Pablo Antolín & Sandra Blome & David Karim & Stéphanie Payet & Gerhard Scheuenstuhl & Juan Yermo, 2009. "Investment Regulations and Defined Contribution Pensions," OECD Working Papers on Insurance and Private Pensions 37, OECD Publishing.
  • Handle: RePEc:oec:dafaab:37-en

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    defined contribution plans; gestion des risques; investissement; investment; plans de retraite à cotisations définies; regulation; replacement ratios; retirement income; revenu des retraites; risk-management; taux de remplacement;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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