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Title: The impact of defined contribution pension plans on population retirement dynamics
Author: MacDonald, Bonnie-Jeanne
ISNI:       0000 0001 3614 9294
Awarding Body: Heriot-Watt University
Current Institution: Heriot-Watt University
Date of Award: 2007
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Defined contribution pension (DC) plans are on the rise around the world, in both the private pension plan domain as well as in state pension systems. Our study investigates the risks this trend poses to the economic well-being of individuals and the welfare of the aggregate population. Through stochastic simulation, we investigate the potential implications of DC pension plans dominating the income support system for the retired members of a population. We make the assumption that workers retire when they can afford to replace a reasonable proportion of their wages. Our main focus is the demographic retirement dynamics. We also explore, however, consequential changes in the retirement conduct of individuals through the use of structural retirement-behavior models. We find that the retirement age of an individuals with a DC pension plan is extremely unpredictable, even under various investment strategies and retirement models. At the aggregate population level, we find that this uncertainty of the average retirement age over time does not get dampened to any great extent by the heterogeneity of the population. Instead, the central role played by the market in determining retirement dates causes significant variation in the dependency ratio (the ratio of retirees to workers) over time. In addition, various attempts to ameliorate the outcome by introducing additional realistic features in the DC population modeling, such as feedback among the aggregate retirement patterns and macroeconomic variables, do not successfully reduce the volatility to a reasonable level. Our findings suggest that countries dominated by DC schemes of this type may, over time, be exposed to significant risk in the size of its labour force.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available