Systemic Risk Centre Seminar
Date: Monday, 27th September 2021
Time: 1.00 - 2.00pm BST
Speaker: Vasso Ioannidou (Bayes Business School)
Seminar Title: Do Low Interest Rates Jeopardise Your Retirement?
Abstract: We study the effect changes in interest rates have on the risk-taking and risk-shifting incentives of defined-benefit (DB) corporate pension plans. We find that in the era of low interest rates, pension plans’ risk-taking incentives become dominant. Using a difference-in-differences analysis based on an exogenous shock to the discount rates of pension liabilities in the United States (MAP-21), we find that increases in interest rates reduce risk-taking in pension asset allocations. We also find that increases in interest rates decrease the probability of DB plan freezes, which shift pension risk from sponsor firms to employees. These results underscore possible unintended consequences of low interest rate policies.
This online public event is free and open to all but pre-registration is required. Registrations made after the start of the event may not be approved.