Pension institutions are grappling with challenges arising from financial crises and from economic and demographic trends. As a result, many countries want to overhaul their retirement saving systems. The Netherlands has introduced “Defined Ambition” pension plans and more recently proposed a new type of contract: Personal Pension Accounts with Risk-Sharing. In the UK, a national discussion on collective schemes is ongoing but slow to gain traction. Although countries are advancing at different paces, they are united on the common objective to establish new, innovative schemes that can overcome the drawbacks of both defined-benefit and defined contribution plans.
This note highlights the design of various contemporary hybrid pension schemes and discusses the main challenges related to their design.
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