Seminar about Procyclicality of Pension Fund Regulation and Behaviour

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Ward Romp (UvA)

Discussant: Roel Mehlkopf (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl

Abstract subject: This paper studies the labour market effects of pension fund restoration plans in a stylised labour market matching model. During a recession pension funds' funding ratios typically drop significantly and regulations force funds to raise their contribution rates, lower future indexation or cut liabilities immediately. I find that especially raising contribution rates has a self-enforcing effect on new job creation and the value of a match. The first effect creates extra unemployment, the second effect again lowers the value of the pension fund's assets, aggravating the problem. A less distorting solution is to let pension rights fluctuate with the value of the pension assets and to use pension premiums only to finance new rights.

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