This paper explores pension schemes that provide (deferred) variable annuities by sharing risks among current participants on the basis of complete contracts. Annuities are adjusted gradually after an unexpected shock. This is consistent with habit formation and leads to life-cycle investment. We show how these variable annuities can be valued in a marketconsistent fashion and discuss how investment policy of a pension fund can be determined endogenously on the basis of the desired risk profiles of the (deferred) variable annuities.
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