We explore the benefits of intergenerational risk-sharing through both private funded pensions and via the public debt. We use a multi-period overlapping generation model with a pay-as-you-go pension pillar, a funded pension pillar and a government. Shocks are smoothed via the public debt and variations in the indexation of pension entitlements and pension contributions. The intensity of these adjustments increases when the pension funding ratio or public debt gets closer to their boundaries. The best-performing pension arrangement is a hybrid funded scheme in which both contributions and entitlement indexation are simultaneously deployed as stabilisation instruments. We find that contribution and indexation adjustment policies are substitutes and the same is the case for contribution and tax adjustment policies. By contrast, indexation and tax adjustment policies are complements. We compare different taxation regimes and conclude that a regime in which pension benefits are taxed, while contributions are paid before taxes, is preferred to a regime in which contributions are paid after taxes, but benefits are untaxed.

The standard model of intertemporal choice assumes risk neutrality towards the length of life: under additivity of lifetime utility and expected utility assumptions, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel, this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the US population. The questions we ask allow to find the distribution as well as to quantify the degree of risk aversion with respect to the length of life in the population. We find evidence that roughly 75% of respondents were not neutral with respect to longevity risk. Hence, there is a little empirical support for the joint use of the expected utility and additive lifetime utility assumptions in life-cycle models. Higher income households are more likely to be risk averse towards the length of life. We do not find evidence that the degree of risk aversion varies with age or education.

We investigate the determinants of interest in reverse mortgages (RM) for a sample of Italian homeowners and find that the majority of individuals belonging to categories identified, on the basis of economic analysis, as the main potential beneficiaries (i.e., women, elderly and ‘house rich–cash poor’ individuals) are, in fact, less likely to express an interest. When allowing for individual characteristics, we find that most results remain robust and notice that risk aversion and negative expectations on one's standard of living after retirement predict higher interest in the product. These results suggest that RM is perceived not so much as an ordinary instrument to achieve a better standard of living, but rather as a remedy against poor consumption.

This paper studies the relationship between financial literacy and retirement planning in Chile, a country with mandatory defined contribution pension plans at the core of its retirement policy. Using a novel dataset, we find that very few Chileans are planning for their retirement and that the levels of financial literacy are remarkably low with only 47% of the population understand compound interest and only 18% understand the concept of inflation. We also find a positive and significant relationship between financial literacy and retirement planning suggesting that investments in financial education could have a substantial impact on the way people think about retirement and therefore on their ability to reach retirement with adequate resources.

We analyse annuitization rates by policyholders with individual deferred annuities in Korea to assess the impact of different tax policies on payout decisions between 2008 and 2011. Under the Korean tax system, two types of individual deferred annuities were sold: qualified (taxed for lump sums) and non-qualified (tax free for lump sums). Our results show that policyholders with qualified contracts are more likely to select a life annuity option than a lump-sum distribution, compared to policyholders of non-qualified contracts. This suggests that policyholders are more likely to use non-qualified contracts as savings vehicles than as longevity insurance.