The Promise of Defined Ambition Plans: Lessons for the United States

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Wharton Pension Research Council Working Papers
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Defined ambition
variable annuity
valuation
risk profile
risk management
liabilities
consumption frame
Economics
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We explore Dutch proposals for defined ambition plans in an occupational pension context. Firms no longer act as external risk sponsors but continue to provide a distributional platform for pensions, thereby addressing behavioral and agency issues as well as imperfections of insurance and financial markets. Pension entitlements are defined in terms of (deferred) annuities, and participants share the risks of assets and a joint liability pool on the basis of complete contracts. We investigate risk management and valuation of these plans, explore their strengths and weaknesses, and analyze whether such plans hold promise for the United States.

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2014-09-01
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The published version of this Working Paper may be found in the 2016 publication: Reimagining Pensions (https://pensionresearchcouncil.wharton.upenn.edu/reimagining-pensions-2/).
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