Pension Funds and Risk-sharing in the Finnish Earnings-related Pension System

Abstract

We study the use of pension funds in the Finnish earnings-related pension system with the aim of smoothing contributions over time under demographic and economic risks. Smoothing is affected by the revisions in long-term forecasts and is thus imperfect. As a partially funded defined-benefit system, demographic risks and asset yield risks directly affect the contributions. In a general equilibrium setup, these risks also affect wages and thus pension benefits and replacement rates. We also consider alternative benefit rules where risks are transferred more to the pensioners.

Publication info

Series
ETLA Raportit - Reports 90
Date
07.05.2019
Keywords
Pensions, Funding, Contribution smoothing, Risks, Generational fairness
ISSN
2323-2447, 2323-2455 (Pdf)
JEL
E17, H55
Pages
37
Language
Finnish