<p>This study suggests a pension redistribution action by the central planner while preserving balanced, collectively funded pension schemes and social security mechanisms. We introduce a revitalized behavioral approach by utilizing financial option positions and the Prospect Theory reference point as the strike price for these options. Our model replaces traditional investigation methods with a standard utility function. It considers the variation in socioeconomic interests among different income cohorts in society and their diverse risk preferences for personal wealth and societal welfare. Specifically, this study proposes a central distributional action that satisfies high earners with a hedging action addressing their heightened psychological reference point, while also supporting the alleviation of poverty among low earners in old age. The key innovation of the proposed method lies mainly in the diversity of participants’ risks and aspirations.</p>