Comparison of the Portfolio Decisions of Participants in U.S. 401(k) Pension Plans with the Asset Allocation of Dutch Pension Plans

In our project, we will compare the asset allocation (or portfolio choices) of U.S. 401k pension plans with the different types of Dutch retirement systems. We focus on U.S. 401k pension plans because the Dutch retirement system is transitioning from defined benefit (DB) pension system towards defined contribution (DC) retirement system. Bovenberg and Nijman (2017) discuss the proposed reforms of the Dutch system that will introduce more asset allocation and risk-taking options tailored to individual characteristics and preferences.
Even though DB pension funds remain still the dominant form in the Netherlands, DC retirement plans at the end of 2017 already account for €33.4 billion assets. These assets are distributed in the following three types of pension providers: (1) insurance corporations €46.1 billion (of which €17.8 billion DC); (2) pension funds €1,248 billion (of which €8.9 billion DC); (3) and premium pension institutions €6.7 billion (all of which DC).2
Moreover, in the DB area, the promised pension benefits became more flexible in the last years. Many pension funds introduced conditional adjustment of promised benefits for wage and price inflation depending on the funding status, while some pension funds even decided to cut promised benefits in nominal terms (Bovenberg, Mehlkopf and Nijman, 2015). These decisions imply that the trend towards DC retirement plans will continue in the future.
Therefore, a comparison of the current Dutch pension funds with U.S. 401k plans, the largest DC retirement industry in the world, can provide valuable lessons for the next steps in the transition process.

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Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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