This literature review discusses how to design a default life-cycle asset allocation for a defined contribution (DC) pension scheme. This default option may be the same for all participants, or it could be customised to plan members’ profiles.
In particular, customising the allocation towards the individual’s labour income profile, real estate exposure and social security benefits is key. Environmental, social and governance (ESG) considerations are becoming essential to pension plan members, who are demonstrating an increasing appetite for socially responsible (SR) investment.
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