The creeping stock market collapse eroded the wealth of funded pension systems. This led to
political tensions between generations due to the fuzzy definition of property rights on the
pension funds wealth. We argue that this problem can best be resolved by the introduction of
generational accounts. Using modern portfolio and consumption planning theory we show
that the younger generations should have the higher equity exposure due to their human
capital. Capital losses should be distributed smoothly over lifetime consumption. When stock
markets are depressed equity should be bought, savings and consumption should be scaled
down equiproportionally, and retirement should be postponed. Portfolio investment
restrictions are quite costly.
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