Determining equivalent charges on flow and balance in individual account pension systems
Keywords:
Pension fund, Defined benefit, Individual account, Charge on balance, Charge on flowAbstract
In this article, we determine a charge on balance that is equivalent to a certain fixed charge on flow for a particular utility–maximizer affiliate participating in a defined-contribution pension fund under the system of individual accounts. We also prove, under market completeness, that the equivalent charge on balance depends only on the current level of the charge on flow, the length of the accumulation period and the risk free rate of return.
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