Michael Burda, Humboldt-Universität zu Berlin

“Trends in Productivity Growth across the OECD: Implication for Pension Policies”


I survey recent trends in productivity growth, secular stagnation, demographic change and real interest rates around the world, and examine the leading explanations for these developments. Simple economic growth models predict that rates of growth of population and technological progress are associated with, and are probably causal for real interest rates. While capital mobility should harmonize real interest rates across countries, factors behind the famous Feldstein-Horioka puzzle continue to allow for considerable slippage, I first document these developments in the OECD. Econometric evidence is then introduced to evaluate the basic hypotheses. Implications for pension policies are drawn.



Roel Beetsma, University of Amsterdam

“Drivers of Pension Reform Measures in the OECD”


Using a unique narratively-constructed dataset of pension reform measures of the OECD countries since the 1970s, we explore the determinants of those measures based on information available when they are legislated. We distinguish expansionary, contractionary and combined reform regimes. No regime’s likelihood is affected by current or projected demographic changes. By contrast, business cycle indicators play a substantially larger role: a worsening makes contractionary and combination regimes more likely and expansionary regimes less likely. A simple theoretical model with an adjustment cost of changing the pension arrangement can account for reform responsiveness to the business cycle and non-responsiveness to demography.



Joao Cocco, London Business School

“Pensions, Investments and Housing”


In many countries, the government, through the social security system, provides a pension to retirees. However, there have been increasing concerns about the sustainability of these mainly underfunded defined-benefit pension systems. The underfunding has arisen in part due to the aging of the population and it has led to a shift towards retirement systems that are more defined contribution in nature. We will discuss results from life-cycle models aimed at evaluating optimal life-cycle investing and households’ saving and retirement decisions in the presence of longevity and investment risk. In addition, we will discuss the role of housing wealth for the financing of retirement consumption. 



Rikke Sejer Nielsen, Copenhagen Business School

“Consumption Smoothing over the Life Cycle with Interest-Only Mortgages?”


Do households use interest-only mortgages to facilitate consumption smoothing over the life cycle or simply to myopically finance large contemporary consumption? We address these questions empirically based on a unique Danish data set with detailed information on household characteristics and the mortgages they hold. The data span the period from 2001 to 2015 and cover the introduction of interest-only mortgages in Denmark. We find that young and old households use interest-only mortgages more frequently than middle-aged households. Households using interest-only mortgages have a higher level of consumption, are more indebted, and live in more expensive houses, whereas their savings in financial assets are not affected by their choice of mortgage. We conclude that interest-only mortgages have the potential to overcome financial restrictions faced by young and old households, thereby allowing them to smooth out consumption over the life cycle, but also that households using interest-only mortgages are more leveraged.



Linda Sandris Larsen, Copenhagen Business School

“Hedging Recessions - How Unemployment Risk Affects Investments over the Life Cycle”


Traditional life-cycle models conclude that consumer-investors should be fully invested in stocks when young - in stark contrast to observed stock holdings - and then gradually replace stocks with bonds as retirement is approaching. We show that a careful modeling of business cycle and unemployment risks reduce the early-life stock holdings dramatically, in some situations even to zero in accordance with the wide-spread non-participation in the stock market. The reduction is driven by the relatively high unemployment risk of young adults, the negative influence of unemployment on future salaries, and the business cycle variations in stock prices and unemployment risk that cause human capital to be riskier and more stock-like.



Torben Möger Pedersen, PensionDanmark

“‘New’ Labor Market Pension Schemes reaches adolescence – what are the challenges for maturity?”


The first contributions to the adolescents among Labor Market Pension companies were made 25 years ago. The so-called “new labor market pension schemes” reaches maturity 30 years from now, but they have already made huge impacts on Danish Economy and fiscal sustainability. The new labor market pension schemes were a result of tripartite agreements, and 25 years after, pension saving is still an unwavering priority for the social partners and an important factor in naming Denmark world champion in the Melbourne Mercer index – every year.


Labor Market pension schemes have been a cornerstone in raising the household sectors’ net saving and securing current account surplus for decades. A substantial part of the labor force is covered by labor market pension schemes, and employees under labor market agreements currently contribute 12-17 per cent of gross earnings. In less than 25 years from now, savings-based pensions will play the leading role in the provision of retirement income.


Increasing life expectancy – ‘younger for longer’ - and permanent (?) lower returns on investments – ‘low for longer’ – face labor market pension saving with new challenges. There is also a challenge in including residual groups and thus securing an even larger coverage through higher labor market participation and more labor market agreements.



Bernard Morency, HEC Business School, Montréal

New Perspectives on the Canadian Pension System”


While most countries around the world are facing significant underfunded pension liabilities and favoring DC approaches, Canada has recently reversed a decision that had been taken to increase the retirement age from 65 to 67 and decided to improve the Canada and Québec Pension Plans, its state-sponsored compulsory DB plans. These improvements will be fully funded which will increase significantly the assets managed by CPPIB and La Caisse de dépôt et placement du Québec.


This presentation will explain the rationale behind such decisions and talk about the challenges ahead including those that administering a fully funded state DB plan will create.  



Malene Kallestrup-Lamb, Aarhus University

“The Move towards Riskier Pension Products in the World’s Best Pension Systems: A Comparison of the Netherlands and Denmark”


The Danish and the Dutch pension systems are often referred to as “among the best in the world“ due to the size of pension savings, corporate governance of pension providers, and robustness of pension systems. However, both the Danish and the Dutch pension system face challenges due to the current low-interest rate environment coupled with increasing life-expectancy. This has made it challenging for some pension providers to honor promised (or guaranteed) pensions and, at the same time, fulfill Solvency II capital requirements. As a consequence, the Dutch and Danish pension sectors have undergone and are undergoing considerable changes. We focus on the shifts that take place in both countries, from pension products with relatively low levels of risk for the participant to pension products with more risk but also higher expected return. In particular, we study the consequences of moving from fixed annuities (guaranteed) to variable (unguaranteed) pension products. We also present results from a case study where customers were given the chance to shift from a low-risk to a higher-risk product.

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