Revisiting pension wisdom

As Edward’s post below indicates, the ECB seems to be in a pre-Christmas rush of visibility to set out its opinions on various issues.  Jean-Claude Trichet delivered a speech on the topic of systemic risk at Clare College, Cambridge, today and it’s a nice roundup of the analytical progress so far and remaining challenges in understanding what the hell happened over the last year.   One of his incidental points worth noting —

What have we learned from this experience in terms of identifying those structural trends in financial systems that are important for systemic risk?  … Fifth and finally, as financial sectors develop, households may take greater risks, for example in mortgage markets and, more broadly, in their pension investments. While this also raises issues of consumer protection, from a systemic perspective, it becomes increasingly important to know how resilient the household sector and consumption can be in such a situation.

It would be hard to find a major report on pensions in any country in recent years that did not recommend a move towards a greater financial sector role in pensions (yesterday’s Irish budget made clear that this will be the future for new entrants to the Irish public sector as well as the established defined benefit system becomes a legacy program).   But as Trichet points out, no one has yet gone back and reconsidered what exactly this model of household investors does to financial market stability, and indeed to macroeconomic stability given the effects on household wealth.   In retrospect (and perhaps even at the time), such a lacuna in such a confidently expressed piece of conventional wisdom is amazing.