Determination of Optimal Investment Strategies For A Defined Contribution (Dc) Pension Fund With Multiple Contributors, Proportional Administrative Costs And Taxation

Abstract

Bright, O. Osu,

This study centres on determining the optimal investment strategies for defined contribution (DC) pension fund with multiple contributors, administration cost and taxation on the invested fund. We assume that a certain proportion of the member’s contributions as administrative cost which is remitted to the pension fund manager also following the Nigerian Pension Reform Act of 2004 the invested fund is subjected to tax. We obtained an optimized equation using Hamilton Jacobi equation, then solve the equation using Legendre transformation method to obtained explicit solutions of the optimal investment strategy for CARA utility function. We observed that the tax has a direct effect on the investment strategies.

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