Investment strategies for pension funds: Defined contribution versus defined benefit

Karl Martin Dolvik & Anders Caspar Hanneborg

Student thesis: Master thesis

Abstract

This paper investigates the pension sector in Norway, a hot topic among economists in Norway for the recent years. We look at different asset allocation strategies for pension funds and our results indicate that the current investment strategies underperform alternative investment strategies suggested in academic literature. We compare the defined benefit and the defined contribution pension scheme and find that, given today’s low defined contribution rates, the defined contribution scheme will not perform equivalent pension payments to the defined benefit scheme, neither in terms of size or risk. These findings have two important implications; firstly, pension funds should reconsider their investment strategies and secondly, the defined contribution rates are on average too low for pension holders under the defined contribution scheme to be equivalent to the defined benefit scheme. page

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages147