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Recovery measures of underfunded pension funds: higher contributions, no indexation or pension cuts?

Published online by Cambridge University Press:  19 December 2016

LEO DE HAAN
LEO DE HAAN*
Affiliation:
Economics and Research Division, De Nederlandsche Bank, Amsterdam, The Netherlands (e-mail: l.de.haan@dnb.nl)
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Abstract

Using recovery plan data of 213 underfunded Dutch pension funds for the years 2011, 2012 and 2013, discrete choice models are estimated describing pension funds' choices between three recovery measures: higher contributions, no indexation and pension cuts. The estimation results suggest, first, that pension cuts are more likely when the funding ratio is very low, there is little time left for recovery, the pension fund is not a corporate pension fund, and its participants are still relatively young. Second, the results suggest that Dutch pension funds consider contribution increase first, no indexation second and pension cuts only as a last resort.

Keywords

G23G28G32Pension fundsfunding ratioregulationrecovery plans
Type
Article
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 4 , October 2018 , pp. 437 - 468
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

The author would like to thank two anonymous referees and the editor (David Love), Jacob Bikker, Laurence Booth, Dirk Broeders, Jakob de Haan, Paul Hilbers, Jeroen Hinloopen, Steven Jonk, Agnes Joseph, Sebastiaan Pool, Maarten van Rooij, participants of the 2015 World Finance Conference (Buenos Aires) and the Netspar Pension Day (Utrecht, 2015), and seminar participants at DNB for useful comments on earlier versions. Patrick Colijn, Henk van Kerkhoff and Enrico Vroombout provided valuable data assistance. The views expressed are the author's and do not necessarily reflect official positions of DNB.

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