Conditional indexation offers a middle way between defined benefit and defined contribution pension schemes. In this paper, we consider a fully-funded pension scheme with conditional indexation. We show how the pension fund can be managed to reduce the risks associated with promised pension benefits when declared benefits are adjusted regularly during the working life. In particular, we derive an investment strategy that provides protection against underfunding at retirement and which is self-financing on average. Our results are illustrated in an extensive simulation study.
