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An analysis of the Dutch-style pension plans proposed by UK policy-makers

Published online by Cambridge University Press:  06 April 2021

IQBAL OWADALLY Open the ORCID record for IQBAL OWADALLY [Opens in a new window] ,
RAHIL RAM  and
LUCA REGIS Open the ORCID record for LUCA REGIS [Opens in a new window]
IQBAL OWADALLY
Affiliation:
Cass Business School, City, University of London, London, UK e-mail: iqbal@city.ac.uk
RAHIL RAM
Affiliation:
Fulcrum Asset Management LLP, London, UK e-mail: rahil.ram@fulcrumasset.com
LUCA REGIS
Affiliation:
Department of Socio-Economic and Mathematical-Statistical Sciences, University of Torin and Collegio Carlo Alberto, Turin, Italy e-mail: luca.regis@unito.it
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Abstract

Collective Defined Contribution (CDC) pension schemes are a variant of collective pension plans that are present in many countries and especially common in the Netherlands. CDC schemes are based on the pooled management of the retirement savings of all members, thereby incorporating inter-generational risk-sharing features. Employers are not subject to investment and longevity risks as these are transferred to plan members collectively. In this paper, we discuss policy related to the proposed introduction of CDC schemes to the UK. By means of a simulation-based study, we compare the performance of CDC schemes vis-à-vis typical Defined Contribution schemes under different investment strategies. We find that CDC schemes may provide retirees with a higher income replacement rate on average, together with less uncertainty.

Keywords

Collective pension schemesDutch pensionsrisk-sharing mechanismssimulations
Type
Article
Information
Journal of Social Policy , Volume 51 , Issue 2 , April 2022 , pp. 325 - 345
Copyright
© The Author(s), 2021. Published by Cambridge University Press

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