Are pension funds too important to fail? Or too big to save?

  • Sophie Houwen Sophie Houwen

This paper examines whether pension funds are too important to fail and, if so, what appropriate policy measures are. The pros and cons of the different policy strategies are analyzed. Alternatively, pension funds may also be too big to save. Literature on pension funds being too important to fail or too big to save is scarce. There is however extensive literature on these questions for banks. We analyze the available banking literature and evaluate to what extend it is applicable to pension funds. Furthermore we empirically analyze whether one of the moral hazards that characterizes a too important to fail environment, excessive risk taking, occurs in the Dutch pension fund sector. Finally policy recommendations will be given with respect to failing pension funds.

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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