Journal of Risk

Risk.net

A public guarantee of a minimum return to defined contribution pension scheme members

Giuseppe Grande, Ignazio Visco

ABSTRACT

The recent financial crisis has clearly demonstrated the exposure of defined contribution (DC) pension scheme members to extreme financial market risks. This paper argues that the government could offer DC plan members a minimumreturn guarantee, funded by risk-based premiums. Option-pricing formulas show that the guarantee could be quite expensive, but public provision could reduce the costs borne by workers. Such an arrangement would be sustainable for the government and would give workers an acceptable benefit-contribution ratio in worst-case scenarios, while still allowing them to reap the benefits of occupational or individual funded pension schemes.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here