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Pension Funds and Risk-sharing in the Finnish Earnings-related Pension System

Author

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  • Lassila, Jukka
  • Valkonen, Tarmo

Abstract

Abstract We study the use of pension funds in the Finnish earnings-related pension system with the aim of smoothing contributions over time under demographic and economic risks. Smoothing is affected by the revisions in long-term forecasts and is thus imperfect. As a partially funded defined-benefit system, demographic risks and asset yield risks directly affect the contributions. In a general equilibrium setup, these risks also affect wages and thus pension benefits and replacement rates. We also consider alternative benefit rules where risks are transferred more to the pensioners.

Suggested Citation

  • Lassila, Jukka & Valkonen, Tarmo, 2019. "Pension Funds and Risk-sharing in the Finnish Earnings-related Pension System," ETLA Reports 90, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:report:90
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    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-90.pdf
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    More about this item

    Keywords

    Pensions; Funding; Contribution smoothing; Risks; Generational fairness;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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