This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach...

The growth and popularity of defined contribution pensions, along with the government's increasing attention to retirement plan costs and investment choices provided, make it important to understand how people select their retirement plan investments. This paper shows how employees in a large...

In this work we solve in a closed form the problem of an agent who wants to optimise the inter-temporal utility of both his consumption and leisure by choosing: (i) the optimal inter-temporal consumption, (ii) the optimal inter-temporal labour supply, (iii) the optimal share of wealth to invest...

In this article we consider the post-retirement phase optimization problem for a specific pension product in Germany that comes without guarantees. The continuous-time optimization problem is defined consisting of two specialties: first, we have a product-specific pension adjustment mechanism...

Pension funds only explored alternative assets quite recently, prodded by financial crises which devastated equity returns and led to low bond returns. We assess the addition of alternative assets to pension fund portfolios in terms of the total benefit derived from diversification, addition of...

Collectively organized pension plans must increasingly demonstrate that the risk preferences of their members are adequately reflected in the plans' asset allocations. However, whether funds should elicit individual members' risk preferences to achieve this goal, or whether they can rely on...

The glide path of typical target date funds is based on the relatively simple assumption of risk. If an explicit term structure of risk is present or risk is time-varying, the conventional glide path may not be adequate to fulfil the purpose of target date funds. We introduce a new approach to...

We analyse the investment performance of a large sample of individuals investing in discretionary retirement savings products offered by a large Australian financial institution. This is of interest from the perspective of market efficiency and the ability of individuals to over or under-perform...

We study optimal portfolios for defined contribution (possibly mandatory) pension systems, which maximize expected pensions subject to a risk level. By explicitly considering the present value of future individual contributions and changing the risk-return numeraire to future pension units we...

In recent years, adverse market conditions demolished the funding status of many defined benefit (DB) pension plans highlighting the need for better risk management. We propose a novel framework to decompose the risk of DB pension plans which differs from earlier work in two fundamental ways....