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The Pension ChallengeRisk Transfers and Retirement Income Security$
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Olivia S. Mitchell and Kent Smetters

Print publication date: 2003

Print ISBN-13: 9780199266913

Published to Oxford Scholarship Online: August 2004

DOI: 10.1093/0199266913.001.0001

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Risk Transfer in Public Pension Plans

Risk Transfer in Public Pension Plans

Chapter:
(p.102) Chapter 6 Risk Transfer in Public Pension Plans
Source:
The Pension Challenge
Author(s):

Olivia S. Mitchell (Contributor Webpage)

Kent Smetters (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0199266913.003.0006

This chapter shows that existing pension actuarial methods transfer risk away from early generations towards later generations. This causes equal expected costs to appear as unequal risk-adjusted costs, whenever risky assets are included in defined benefit plans. This bias favours current taxpayers, plan participants, and politicians at the expense of future taxpayers.

Keywords:   pension plans, risk transfer, actuarial methods, retirement plan, taxpayers, equal expected costs, risk adjusted costs

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