TY  - JOUR
AU  - Merton,Robert C.
TI  - On Consumption-Indexed Public Pension Plans
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 910
PY  - 1982
Y2  - June 1982
UR  - http://www.nber.org/papers/w0910
L1  - http://www.nber.org/papers/w0910.pdf
N1  - Author contact info:
Robert C. Merton
Massachusetts Institute of Technology
Sloan School of Management, E62-634
77 Massachusetts Avenue
Cambridge, MA 02139
Tel: 617 715 4866
E-Mail: rmerton@mit.edu
M1  - published as Robert C. Merton. "On Consumption Indexed Public Pension Plans," in Zvi Bodie and John B. Shoven, editors, "Financial Aspects of the United States Pension System" University of Chicago Press (1983)

AB  - Using the known result that life-cycle investors will optimally hold portfolios whose returns are perfectly correlated with aggregate consumption, this paper uses a simple intertemporal general equilibrium model to explore the merits and feasibility of pension plans where both accumulations and benefits are linked to aggregate per capita consumption. Although the analysis is made within the framework of a public pension plan, it applies equally well to organized private pension plans where participation is virtually mandatory and where individually designed programs are not practical. An additional feature of the plans examined is that they provide for life annuities during both the accumulation and retirement phases of the life cycle.
ER  -