Risk Transfer in Public Pension Plans

Olivia S. Mitchell and Kent Smetters

in The Pension Challenge

Published in print November 2003 | ISBN: 9780199266913
Published online August 2004 | e-ISBN: 9780191601323 | DOI:
 Risk Transfer in Public Pension Plans

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This chapter shows that existing pension actuarial methods transfer risk away from early generations towards later generations. This causes equal expected costs to appear as unequal risk-adjusted costs, whenever risky assets are included in defined benefit plans. This bias favours current taxpayers, plan participants, and politicians at the expense of future taxpayers.

Keywords: pension plans; risk transfer; actuarial methods; retirement plan; taxpayers; equal expected costs; risk adjusted costs

Chapter.  5824 words.  Illustrated.

Subjects: Financial Markets

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