Collective versus individual pension schemes: A welfare-theoretical perspective

Collective pension contracts allow for intergenerational risk sharingwith the unborn. They therefore imply a higher level of social welfarethan individual accounts. Collective pension contracts also imply a suboptimal allocation of consumption across time periods and states of nature however. Hence, collective pension contracts also reduce social welfare.This paper explores the welfare eects of a number of collective pension contracts, distinguishing between the two welfare effects. We find that collective schemes can be either superior or inferior to individual schemes.