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Pensionmetrics 2: stochastic pension plan design during the distribution phase

Blake, David, Cairns, Andrew J. G. and Dowd, Kevin (2003) Pensionmetrics 2: stochastic pension plan design during the distribution phase. Financial Markets Group Discussion Papers (442). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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We consider the choices available to a defined contribution (DC) pension plan member at the time of retirement for conversion of his pension fund into a stream of retirement income. In particular, we compare the purchase at retirement age of a conventional life annuity (i.e., a bond-based investment) with distribution programmes involving differing exposures to equities during retirement. The residual fund at the time of the plan member's death can either be bequested to his estate or revert to the life office in exchange for the payment of survival credits while alive. The most important decision, in terms of cost to the plan member, is the level of equity investment. We also find that the optimal age to annuitise depends on the bequest utility and the investment performance of the fund during retirement.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2003 The Authors
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
Date Deposited: 12 Aug 2009 11:10
Last Modified: 22 Nov 2022 15:21

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