Collective versus Individual Pension Schemes: A Welfare-Theoretical Perspective

38 Pages Posted: 18 Oct 2014 Last revised: 24 Oct 2014

See all articles by Ed Westerhout

Ed Westerhout

CPB Netherlands Bureau of Economic Policy Analysis; Tilburg University - Tilburg University School of Economics and Management

Jan Bonenkamp

CPB Netherlands Bureau of Economic Policy Research

Peter Broer

Tilburg University - CentER, Faculty of Economics and Business Administration; CPB Netherlands Bureau for Economic Policy Research

Date Written: October 24, 2014

Abstract

Collective pension contracts allow for intergenerational risk sharing with the unborn. They therefore imply a higher level of social welfare than individual accounts. Collective pension contracts also imply a sub-optimal allocation of consumption across time periods and states of nature however. Hence, collective pension contracts also reduce social welfare. This paper explores the welfare effects of a number of collective pension contracts, distinguishing between the two welfare effects. We find that collective schemes can be either superior or inferior to individual schemes.

Suggested Citation

Westerhout, Ed and Bonenkamp, Jan and Broer, Peter, Collective versus Individual Pension Schemes: A Welfare-Theoretical Perspective (October 24, 2014). Netspar Discussion Paper No. 10/2014-045, Available at SSRN: https://ssrn.com/abstract=2510932 or http://dx.doi.org/10.2139/ssrn.2510932

Ed Westerhout (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

Jan Bonenkamp

CPB Netherlands Bureau of Economic Policy Research ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Peter Broer

Tilburg University - CentER, Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://center.uvt.nl/staff/broer/

CPB Netherlands Bureau for Economic Policy Research ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31 70 33 83 478 (Phone)
+31 70 33 83 350 (Fax)

HOME PAGE: http://www.cpb.nl/eng/general/org/homepages/dpb/

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