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This thesis investigates three key issues in the design of defined-contribution (DC) pension plans: the optimal asset allocation strategy. the optimal retirement age and the optimal pension contribution rate. r first derive the optimal asset allocation strategy by dynamic programming for both power utility and exponential utility with stochastic interest rate and wage income. The expected terminal utility is assumed to be a function of wealth-to-wage ratio. For power terminal utility with fully hedgeable wage income or no further contribution, the optimal portfolio composition is horizon independent. For the exponential terminal utility with contribution from wage incomes with uninsurable risk, the optimal portfolio composition is also horizon independent, and the pension plan has a constant optimal pension wealth-to-wage ratio. . I then compare the optimal allocation strategy with three simple dynamic allocation strategies, the lifestyle, the threshold and the constant proportion portfolio insurance (CPPI) strategies, by numerical simulation. The optimal asset allocation strategy produces much better performance than the three simple dynamic allocation strategies. It also shows that the deterministic lifestyle strategy and the threshold strategy can be replicated by static allocations with the same expected returns and smaller vanances. The optimal retirement age and the optimal pension contribution rate problems are solved as part of the expected lifetime utility maximization problem. I show that when utility is solely determined by consumption and there is no defined benefit (DB) pension plan, the retirement age has to be exogenously given. The optimal retirement age is derived for the consumption and leisure additively separable utility and the multiplicatively separable utility. I denve the optimal pension e6tHSaHti9R rates for a gjven retirement age in a certainty world and then demonstrates that the lower and upper bounds of optimal pension contribution rates can be derived for nonlinear marginal utility with uninsurable wage risk.

This thesis - which comprises mainly a collection of published articles - is about the saving and investment decision-making of members of defined contribution (DC) pension plans. An analysis of the decisions individuals make when saving for retirement fits well within the growing literature on behavioural economics and finance, which is based on the idea that many individuals are subject to behavioural traits that can lead to errors in decision-making. This literature is influential in the ideas developed and hypotheses tested in this thesis. The analysis in this thesis uses different methods - focus groups, postal surveys, and analysis of administrative data - to investigate the approaches DC scheme members take to saving and investment decisions and to assess the consistency of those approaches with traditional and behavioural theory. On balance the behavioural theories appear better representations of what members do. The thesis also presents analysis where a simulation model is used to investigate the effects of inertia (in terms of joining decisions) and default bias (in terms of investment choice) on the pension outcomes DC scheme members are likely to enjoy. The thesis concludes with policy suggestions concerned with improving the design of DC pension plans and directions for further research.

This research analyses three of the main topics on Economics of Ageing relevant for the debate on public policies for old age. The first section analyses the most recent proposal of pension reform from a pay-as-you-go to a fully funded system with personal accounts and its impact on household consumption and saving. This particular type of pension reform has been encouraged by policymakers under the premise that it promotes private savings. However, this thesis provides evidence from the Mexican case which could contradict that assumption. The main results show that the Mexican pension reform increased consumption and crowded out savings of low income workers, who are the majority of population affected by the public policy. These findings are consistent with the predictions of the Life Cycle model, as the theoretical analysis shows that the pension reform caused an increase in after tax labour income and pension wealth particularly for low income employees. The empirical evaluation is conducted using a nonparametric difference-indifferences estimator implemented with propensity score matching. The second section studies whether pension systems provide incentives for early retirement. In developed countries, labour force participation around retirement age has declined in the past decades. The financial sustainability of pension systems not only bears the demographic trends of an ageing population with higher life expectancies but individuals are retiring at younger ages. Recent studies illustrate that these phe-nomena are also emerging in developing countries. This thesis finds evidence that the pension scheme provides incentives to retire early for the Mexican case. Finally, the third section is on the adequacy of saving for retirement. Previous empirical literature has found a sharp decline in consumption during the first years of retirement implying that individuals do not save enough for their retirement. This phenomenon has been called the retirement consumption puzzle. In contrast to some of the previous studies, we find no conclusive evidence of the retirement consumption puzzle in the US during the first year of retirement. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many of the previous studies. Food expenditure around retirement decreases The latter could be explained by a reallocation of the budgets hares after retirement to adjust to a new life style. These results suggest that food expenditure is not an accurate measure to test the Life Cycle Model.

Defined contribution pension (DC) plans are on the rise around the world, in both the private pension plan domain as well as in state pension systems. Our study investigates the risks this trend poses to the economic well-being of individuals and the welfare of the aggregate population. Through stochastic simulation, we investigate the potential implications of DC pension plans dominating the income support system for the retired members of a population. We make the assumption that workers retire when they can afford to replace a reasonable proportion of their wages. Our main focus is the demographic retirement dynamics. We also explore, however, consequential changes in the retirement conduct of individuals through the use of structural retirement-behavior models. We find that the retirement age of an individuals with a DC pension plan is extremely unpredictable, even under various investment strategies and retirement models. At the aggregate population level, we find that this uncertainty of the average retirement age over time does not get dampened to any great extent by the heterogeneity of the population. Instead, the central role played by the market in determining retirement dates causes significant variation in the dependency ratio (the ratio of retirees to workers) over time. In addition, various attempts to ameliorate the outcome by introducing additional realistic features in the DC population modeling, such as feedback among the aggregate retirement patterns and macroeconomic variables, do not successfully reduce the volatility to a reasonable level. Our findings suggest that countries dominated by DC schemes of this type may, over time, be exposed to significant risk in the size of its labour force.

Full adoption of FRS 17, the accounting standard for retirement benefits, was optional for UK companies from June 22, 2001 until January 1, 2005. Although the Accounting Standard Board (ASB) encouraged early adoption, the continued use of the prior standard, SSAP 24, has been widespread. If the use of SSAP 24 is continued, equivalent information on a FRS 17 basis has to be provided in footnote disclosures (with some exceptions for financial year 2001). Early switchers to FRS 17 do not have to provide equivalent SSAP 24 information. It has been argued that, because of the changes in valuing both the asset and liability recognition sides of the pension plan, adoption of FRS 17 weakens company balance sheets, at least during the period considered. The impact on the profit and loss account is less clear. The study first analysed non-switching companies and, :fi:om hand-collected data, assessed the potential impact of switching from SSAP 24 to FRS 17. The result shows that, in general, the balance sheet recognition under FRS 17 of the pension plan would have been lower, relative to SSAP 24. The total pension expense recognised under FRS 17.is lower for these companies, implying higher profit figures, than it is under SSAP 24.

Australia, like many developed countries, places a strong emphasis on self-provision in later life. This is embodied in the Australian superannuation system, an earnings-related retirement savings mechanism. Women have been identified as a group poorly served by the existing retirement income framework and are more vulnerable to financial insecurity in old age. The implications of this for women's retirement incomes provide the context in which this thesis is situated. There is a need for research that explores factors that affect individuals' decisions to save for their retirement to inform and better target policy in Australia. This thesis aims to meet that need. Although there have been various explanations for women 's low retirement savings, not enough attention has been paid to the factors that influence the decision to save, especially for later life. This study uses a consumer decision-making framework that identifies a number of key stages in the decision-making process. This thesis argues that the decision-making process can be broken into two key stages: activities associated with making the decision to save for retirement; and the activities associated with actual savings behaviour.

This dissertation is concerned with the empirical study of households' decisions on consumption and time use over the life-cycle. The first chapter presents evidence on the role of shocks around the time of retirement as a potential explanation of the retirement consumption puzzle. We address this issue by studying how expenditure of households in different quartiles of the pre-retirement wealth distribution behaves around the time of retirement and how th is is related to health shocks. In the next chapter wc focus on consumption over the life-cycle and show how different consumption patterns between workers aud pensioners translates into different iuflation experiences. We first document the expenditure life-cycle profile in the VK and show how differences in the consumption bundle of pem;ioners and workers translates into different inflation experiences. In the second part of the chapter we estimate cost of living; indexes for pensioners and workers in order to better understand pension income requirements . We estimate a demand system and compute the change in the cost ofiiving and the substitution effect for both pensioners and workers for the period 1990-2009. The last chapter focuses on household decisions related to food consumption and the use of time. Using a combination of food diary data and information on its nutritional content, we compile a unique time series of microdata on calorie and food purchases ill England spanning over more than 30 years. We measure calories from food at home purchases over the whole time series, but using a combination of observed and imputed data, are also able to fill the gap of knowledge about calories from other foods and drinks: eating out and alcohol. In addition to this, we also show data on bodyweight, calorie purchases and calories expended in different activities. 3