Shocks to Occupational Pensions and Household Savings
By Francesco Caloia, Mauro Mastrogiacomo & Irene Simonetti
This paper studies the saving response of households to shocks in the capital position of their pension fund. Using survey panel data matched to supervisory data of Dutch occupational pension funds for a period that involved three major economic crises, we provide evidence of an increase in savings driven by a worsening of the financial position of pension funds. The identification strategy exploits cross-sectional and time variations in the funding ratios of pension funds. These variations are exogenous shocks to the pension wealth of pension fund members as these result from asset price adjustments and asset allocations over which members have no direct control. We show significant saving responses to general changes in the funding ratios, as well as to direct shocks to pension funds such as in the event of a funding deficit or a stop to conditional indexation. The change in savings is especially seen among workers who participate in pension funds with historically lower returns.
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