Online After Lunch Werkgroepbijeenkomst: Shocks to Occupational Pensions and Household Savings

This paper studies the saving response of households to shocks to the capital position of pension funds. Using survey panel data matched to supervisory data of occupational pension funds in the Netherlands, for a period covering three major economic crises, we provide evidence of the increase in savings driven by a deterioration in the financial position of pension funds. The identification strategy exploits cross-sectional and time variation in the funding ratios of pension funds, which are exogenous shocks to the pension wealth of pension fund members as they result from asset price corrections and asset allocations over which members have no direct control. We show significant saving responses to general changes in the funding ratios, as well as to direct shocks to pension funds such as in the event of a funding deficit, a stop to conditional indexation, and a pension curtailment. The change in savings is concentrated among workers of pension funds with historically lower returns.