In the presence of idiosyncratic income risk and rate of return risk, does an unfunded pension play a role in intragenerational risk sharing? Towards its redistributive nature, what are the attitudes of high- and low-income earners respectively? How do people adjusttheir saving and risk management behaviors under different pension systems? As a result, how does a pension system affect the social welfare when taking into account the issue of risk exposure? This paper intends to answer these questions using an experimental method. Consistent with most theoretical predictions from the model, the main ndings are: (i) low- income earners shows more support for unfunded pensions; (ii) when high-income earners take a larger proportion in a society, people of all income levels are more supportive for unfunded pensions; (iii) an unfunded pension discourages savings in funded pensions; (iv) people tend to take on more risk in their funded pensions as the unfunded pension expands; (v) low-income earners benefit more from an unfunded pension; (vi) more risk averse agents benefit more from an unfunded pension.

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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