For individuals in defined contribution schemes that are unable to choose their funding strategy, the default investment allocation is assigned regardless of their differences.Many pension providers often exclude some important factors such as the first pillar system design and human characteristics when determining the default strategy. This thesis investigates the effect of the different first pillar system taking into account realistichuman capital characteristics on the optimal asset allocation in defined contribution pension schemes across Europe, if the evaluation is based on the downside risk and tail-related risk metrics.This thesis shows that different first pillar systems influence the optimal strategy in the funded scheme. Individuals that receive large entitlements from the first pillar are optimal to choose less risky strategies for the second pillar. Moreover, different salaryprofiles and different starting salary levels also have a significant impact on the optimal strategy. This thesis also finds that a replacement rate target level is an important factor when the risk-reward profile for evaluating the strategies is considered. Increasing the target level requires individuals to choose riskier strategies to obtain the optimal result.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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