Thesis MSc/2018-002Optimal Pension Contract for Heterogeneous Agents Accommodating for Life Events • March 30th, 2018
The current Dutch cabinet has announced reforms into the direction of further individualizing the pension contract. This could lead to personalized pensions for heterogeneous agents accommodating for life events with collective risk sharing. This thesis derives the optimal dynamic contribution scheme and investment strategy over the life cycle for pension plan participants. A suboptimal pension contract, in terms of sub- optimal contribution scheme and suboptimal investment strategy, will lead to welfare losses. These welfare losses are crucial in the policy discussion of the attractiveness of a customized pension contract. Tailoring the pension contract, in terms of contribution scheme and asset allocation, on heterogeneity characteristics such as risk aversion and assumed wage profile provides substantial welfare gain under the assumptions made in this thesis. Adjusting the contribution scheme in the pension contract based on life events such as receiving an unexpected bequest, housi
