Contract specifications for new pension deals
The current Dutch debate concerning pension reforms is still in a conceptual stage where issues as freedom of choice, the value of intergenerational risk sharing, the value of (micro and macro) longevity risk sharing are discussed at relatively abstract levels. It is to be expected that discussions will soon move into more concrete directions. It’s important that solid analyses will underlie final decisions. This concerns in particular:
- Discussions on discount rates to use for the decumulation phase of (partly) individual pensions. Again, long-term discount rates are extremely important here and the applicant has studied these extensively in her thesis.
- Discussion on sensitivity to (subjective) parameters have played a large role in the past and, given that some collective elements are likely to persist, will play a large role in the future as well. It is important to acknowledge the uncertainty that exists concerning many of these parameters, i.e., equity premiums, long-term interest rates but also longevity developments.
- Although there seems to be wide consensus that micro longevity risk should be shared in pensions (in order to benefit from the mortality credit), it is less clear how this has to be implemented in situations where individuals also face choice. In such a setting the choice of
one participant may affect the (distribution of the) future mortality credit of another participant. This needs more thorough attention. Clearly, similar and even more challenging questions arise when sharing macro longevity risk.
