How to mimic DB-like benefits in a DC product

A classic defined benefit scheme delivers a real annuity at retirement, which is considered to be the optimal pension provision for individuals. The unsustainability of these schemes combined with new regulation is driving a worldwide shift towards defined contribution solutions, which do not deliver a guarantee and thus a suboptimal pension. This thesis shows through a simulation study that using financial derivatives there is a way to combine the best of the two worlds into an individual pension product that has clearly defined ownership while delivering a DB like pension.