Illiquid housing wealth takes a special position in this research, as future house price risk is important for households. Demographic changes can have a large effect on housing demand and house prices in different regions. This adds a large element of peculiar risk to homeowners that is very difficult to hedge in financial markets. Housing capital must also be taken into consideration when looking at optimal contracts for individuals. Also their heterogeneity in human and financial capital must be taken into account. Our main question is:
What constitutes the optimal portfolios of individuals or households during the wealth accumulation phase of the working life, the demand and valuation of guarantee products close to retirement and the choice of annuities in the post-retirement phase?
2. Performance of the industry
The above-mentioned suggestions for optimal pension contracts were compared to what is available in the industry. Our research has contributed to the debate on the trade-off between low-cost collective contracts and provisions, and the tailor-made solutions for a heterogeneous population. Part of this research also considers the additional value of intergenerational insurance in (DB elements of) the pension contract.
3. Individual behavior
Many individuals feel they are financially well prepared for retirement. However, the behavioral finance literature shows that even those individuals who are financially more interested and literate make bad investment decisions. This research relates to actual individual behavior.
