OECD Journal: Financial Market Trends

Frequency
Semiannual
ISSN: 
1995-2872 (online)
ISSN: 
1995-2864 (print)
http://dx.doi.org/10.1787/19952872
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The articles in Financial Market Trends focus on trends, structural issues and developments in financial markets and the financial sector.

Article
 

Assessing the Labour, Financial and Demographic Risks to Retirement Income from Defined-Contribution Pensions You do not have access to this content

English
 
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    http://oecd.metastore.ingenta.com/content/2710021ec008.pdf
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Author(s):
Pablo Antolin, Stéphanie Payet
18 Mar 2011
Pages:
29
Bibliographic information
No.:
8,
Volume:
2010,
Issue:
2
Pages:
189–217
http://dx.doi.org/10.1787/fmt-2010-5kggc0z23fr5

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This article examines the impact of labour, financial and demographic risks on retirement income from DC pension plans, with a special emphasis on labour-market risk. It uses a stochastic model that incorporates uncertainty about returns on investment, inflation, discount rates, life expectancy, employment prospects and real wages. The analysis herein highlights that labour-market risk, as well as uncertainty about returns on investment and inflation, have the largest impact on retirement income. The results suggest that default life-cycle investment strategies that reduce exposure to risky assets in the last decade before retirement are quite helpful in reducing the risk of sharp reductions in retirement income, in particular when a negative shock to equity markets occurs in the years before retiring. However, life-cycle strategies fail to address issues of retirement income adequacy or smooth out the volatility in retirement income from DC pension plans.
 
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