Pension model

The Pension Model is a stochastic simulation model for collective defined contribution occupational pension contracts.

The model was developed in view of the 2010 Pension Agreement between social partners, which implies that pension fund members will explicitly bear portfolio risks in the future. The model generates (1) the distribution of pension projections over time for the proposed risk sharing rule, given the level of pension contributions (fixed), the investment rule and the stochastic return process; and (2) the valuation of the pension contract. The model concentrates on the analysis of income uncertainty during retirement and intergenerational redistribution issues. The model has been used extensively to analyze the incorporation of various types of reserves into the standard CDC pension contract.