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This paper adapts an actuarial mathematical model, built for the Italian public pension system, based on the law proposal 3035/2009 to the Accountant Pension Fund (CNPADC). The aim is to introduce a new philosophy pension highly correlated with the concept of adequacy for an ambitious social welfare; using the logic of the 3035/2009 proposal, which guarantees a minimum threshold for the replacement rate of the direct pension, this study provides a rigorous actuarial mathematical model that explains a sort of rate of contribution at a tendential equilibrium, in a pay-as-you-go pension system. This model reveals for which parameters it is possible to intervene to maintain the standard of living in retirement.

In the present work, we study the problem of optimal management of defined contribution pension funds, during the distribution phase, under the effect of inflation, mortality and model uncertainty. More precisely, we consider a class of employees, who, at the time of retirement, enter a life assurance contract with the same insurance firm. The fund manager of the firm collects the entry fees to a portfolio savings account and this wealth is to be invested optimally in a Black–Scholes type financial market. As such schemes usually last for many years, we extend our framework, by: (i) augmenting the financial market with an inflation-adjusted bond, and, (ii) taking into account mortality of the fund members. Model uncertainty aspects are introduced as the fund manager does not fully trust the model he/she faces. By resorting to robust control and dynamic programming techniques, we provide: (a) closed-form solutions for the case of the exponential utility function, (b) a detailed study of the qualitative features of the problem at hand that elucidates the effect of robustness and inflation on the optimal investment decisions.

The global shift towards defined-contribution pension schemes has been accompanied by asymmetric risks and new responsibilities for households to plan and fund effectively their own retirement over the years. In this study, expressing and combining preferences for consumption, investment, bequest, public pension entitlement and the choice of reverse mortgage products, we develop several utility-based life cycle models to facilitate the complex decision-making process that retired households are required to follow to optimise their retirement income. This optimal policy is given in the form of either an analytical or a numerical solution using stochastic dynamic programming. The timing of this paper coincides with the launch of a reverse mortgage style loan, offered by the Australian federal government and allowing retired households to receive an income stream by taking out a loan against the equity in their home. Calibration is performed using real Australian household data.

The pension insurance schemes existence leads to moral hazard: the insured defined benefit pension plans tend to invest more heavily in risky assets. A possible countermeasure mentioned in the literature, but not yet analyzed, is the introduction of a restriction on the pension plans’ portfolio policy. The US context is chosen for analysis. We argue that a portfolio restriction is needed in the case of a sponsoring firm in financial difficulty having an underfunded pension plan. We prove that the restriction should respond to the objective of liability hedging. Estimation results suggest that the corresponding portfolio strategy is a low-risk policy. The paper recommends that the maximum equity proportion is fixed at 30%.

PurposeThis study mainly aimed to show that financial literacy is not always enough in explaining workers' individual pension plan ownership as financial literacy knowledge does not always result in financially literate decisions/actions, and in such cases perceived consumer risks can be used to explain the IPP ownership decision of workers.Design/methodology/approachThe data were collected via a questionnaire adapted from earlier questionnaires using convenience and snowball sampling methods with Internet based applications such as Facebook, Twitter, Instagram and WhatsApp. T-tests, ANOVA and Chi-Square tests were conducted to find out if there is a relation/interaction between individual pension plan (IPP) ownership and financial literacy, and perceived consumer risks (N = 651).FindingsIt is found out that financial literacy level does not have a statistically significant relation with individual pension system (IPS) involvement of workers in Turkey, but perceived consumer risks show differences based on IPP ownership.Originality/valueTo the best of authors’ knowledge, this study contributes to the literature being the first paper to study the relationship between financial literacy and workers' IPP ownership decisions in Turkey and it also shows that perceived consumer risks can be used for explaining workers' IPS involvement in cases where financial literacy knowledge does not translate into financially literate decisions.

In the context of global aging population, improved longevity and ultra-low interest rates, the question of pension plan under-funding and adequate elderly financial planning is gaining awareness worldwide, both among experts, regulatory bodies, and popular media. Additional emergence of societal changes—Peer to Peer business model and Financial Disintermediation—have contributed to the resurgence of the concept of “Tontines” in various papers and the proposal of further models. These generalizations can offer efficient decumulation schemes with high longevity protection which is particularly well adapted for retirement needs—both for its members and carriers. In this paper, we revisit the mechanism proposed by Fullmer and Sabin (Journal of Accounting and Finance, 2019. https://doi.org/10.33423/jaf.v19i8.2615 )—which allows the pooling of Modern Tontines through a self-insured community. This “Tontine” generalization retains the flexibility of an individual design: open contribution for a heterogeneous population, individualized asset allocation and predesigned annuitization plan. The actuarial fairness is achieved by allocating the deceased proceedings to survivors using a specific individual pool share which is a function of the prospective expected payouts for the period considered. After a brief introduction, this article provides a formalization of the mathematical framework with prospective analysis, characterizes the inherent bias, generalizes the mechanism to joint lives, and analyses simulated outcomes based on various assumptions. A reverse moral hazard limit is exposed and discussed (the “Term Dilemma”). Some solutions are then proposed to overcome scheme shortcomings and some requirements for practical implementation are discussed.

The high probability of risk transfer from banks to their counterparties in the field of non-state pension provision (pension account owners, non-state pension funds, insurance companies, asset management companies, etc.) determines the relevance of this study. The paper aims to develop a toolkit for identifying the compliance risk volatility for pension custodian banks based on causal modeling.This toolkit contributes to: 1) tentative cognitive mapping of the causal relationship between the compliance risks of pension custodian banks in the field of financial monitoring and financial and reputational risks to assess their acceptability by stakeholders in non-state pension programs, and 2) impulse modeling. The created toolkit is based on the performance data provided by Ukrainian banks, as well as on the reports of the National Bank of Ukraine. Apparently, an increase in penalty rates by 0.1% would reduce the compliance risks for banks by 0.03%, and the number of violations in financial monitoring (specifically the improper assessment/reassessment of customer risks) by 0.01%. In turn, the compliance risk volatility inherent in custodian banks affects the variability of their reputational and financial risks. Thus, reducing the compliance risks by 0.1% would improve the reputation of banks and increase their regulatory capital by 0.01%.The study findings substantiate the use of the created toolkit to supplement the risk profile components for pension custodian banks, thereby demonstrating the potential volatility of their compliance risks and their consequences for banks and individual groups of their stakeholders. AcknowledgmentThe work is prepared and financed within the framework of the state budget research work No. 45/20202021 “Formation of a risk-oriented system of accumulative pension provision” (DR No. 0120U101508).

O objetivo do estudo foi identificar o impacto potencial nas demonstrações contábeis das empresas do setor elétrico, patrocinadoras de planos de benefícios previdenciários na modalidade benefício definido (BD), decorrente da análise de sensibilidade das premissas atuariais. Para tanto, selecionou-se uma amostra de 26 empresas listadas na B3, na qual foram analisadas as notas explicativas do exercício social encerrado em 31/12/2018. Com base nas análises efetuadas à luz do Pronunciamento Técnico CPC 33 (R1), foi verificado que as premissas significativas mais utilizadas na análise de sensibilidade foram: tábua de mortalidade (53,85%), taxa de desconto (100,00%) e crescimento salarial (23,08%). Com base nos valores informados na análise de sensibilidade, foram calculados os possíveis impactos da alteração de premissas no valor presente da obrigação atuarial das instituições selecionadas.

The article examines and analyzes the essence of pension relations in modern Russia. The aim of the article is to study and test the hypothesis that an important factor in ensuring the effectiveness of the Russian pension system is a clear definition of the essence of economic relations in it, as well as adequate legal and organizational formalization of these relations. The scientific novelty of the study lies in the analysis of the validity and adequacy of applying (from terminological to organizational and practical levels) the classical insurance principles in the organization of the pension system, as well as the possibilities of increasing the efficiency of this system on the basis of the insurance sector. The research methodology is based on the analysis of the genesis and current state of the Russian pension system. The results of the study indicate that the structure of the Russian pension system requires serious reorganization, in particular, a clear distinction between the insurance (pension insurance) and non-insurance (pension provision) segments. The authors substantiated that pension insurance should be based on the classical principles of life insurance, and insurers who have an appropriate license obtained under the Law “On the organization of insurance business in the Russian Federation” should be involved in the implementation of this insurance. At the same time, non-state pension funds must either be transformed into life insurers, or acquire new functionality within the framework of pension provision (the non-insurance part of the pension system). The practical implementation of the research results and related recommendations will allow, according to the authors, to organically structure the insurance and non-insurance segments of the Russian pension system and increase its efficiency. The authors conclude that the construction of pension insurance on the basis of the classical principles of life insurance will make it possible to fully use the accumulated global and domestic experience of using life insurance as a reliable instrument for financing pensions. At the same time, it is necessary to extend to pension relations the norms of regulation of the insurance market and state insurance supervision, which have proven their effectiveness.

The article discusses historical aspects in building a system of pension provision for military servicemen representing a specific social institution which in modern realia is of critical importance in addressing the issues of national security of Ukraine. A retrospective analysis of the historical genesis of the military retirement system demonstrates that the government efforts to ensure social protection of ex-servicemen have laid a solid foundation for shaping a common institution for social security provision to population. The study reveals the nature of economic and social significance of the military retirement system. In the context of the modern stage of military retirement system reform, pension as an economic category is understood as a cash benefit, the right to receive which is established by the government according to the current legislation for citizens who meet certain requirements of the national pension system provision. The research findings also reveal that as a social category, after retirement, the pension acts as a guarantor of economic stability of ex-servicemen and members of their families. The efficiency of the three-tier pension system has been substantiated. The study provides evidence on the existence of a normative legal framework in Ukraine regulating the pension provision to servicemen and their families, the implementation of which however is hampered by the lack of a secure comprehensive system that ensures relevant programs for retired servicemen pension maintenance. Apart from the lack of viable mechanisms for the implementation of ex-servicemen pension plans, Ukraine is currently facing a whole range of internal and external barriers to ensuring decent financial security in military retirement. Among such challenges are the high social risks of the current imbalance between the number of retirees and the number of working-age population. In addition, the replenishment pattern of the Ukrainian national pension system is based on the government subsidies by almost 50%, which in the long run may translate into further increase in the tax burden on business, and as a consequence, will lead to its further shadowing. The study suggests creating a robust regulatory system and an action plan aimed at step-by-step waiver of the solidarity-based military retirement system and shifting to a compulsory two-tier accumulation system of mandatory social contributions through the scheme of deductions from salaries and incomes, thus ensuring a relevant financial support mechanism to facilitate appropriate labor remuneration to ex-servicemen.

This study analyzes a longevity insurance for defined-contribution (DC) systems, using the case of Chile to evaluate its potential implementation. In the current context of increasing longevity and low interest-rates it has become important to find the most efficient formulas for both funding pensions and covering longevity risk, not only for countries with mandatory DC systems, but for pension systems in general. The proposed longevity insurance, in addition to covering the risk to survive longer than expected, it is also able to increase the level of pensions paid to insured workers by allowing the use of savings to fund retirement ages with high probability of being alive, and using income from deferred annuities at ages when the surviving probability is low for most of the pensioners.

Motivation: The study presents the current conditions for receiving the agricultural pension from the Agricultural Social Insurance Fund (KRUS) and the rules for calculating it. They are organised in such a way that the longer the insurance period of the insured person, the lower the so-called supplementary part of their pension than in the case of the insured person with the shorter insurance period. In addition, since 2011, persons insured in KRUS and having farms with an area of more than 50 ha of utilised agricultural area have been obliged to pay higher amounts for their pension insurance which do not have any impact on the level of benefits received. Farmers who also run business activities are treated by the insurance legislation in a similar manner. Hence, there is a need to make changes to the legal and economic regulations in KRUS, which would reflect the new conditions of management in Poland after 1989 and the solutions existing in the Social Insurance Institution (ZUS). Aim: The objective of the study is to identify the regulations related to agricultural pension insurance which are inadequate in relation to the existing conditions of management in our country and to the solutions existing in ZUS. In addition, the objective of the paper is to propose changes to the insurance regulations of KRUS concerning the rules for calculating pensions and the definition of special branches of agricultural production. Also, the effects of these changes from the viewpoint of the insured person have been presented. Results: The result of the study is a proposal for changes to the rules for calculating pensions for farmers insured in KRUS. The paper proposes to split the pension from KRUS into three parts: the contribution part, supplementary part and capital part. The proposals presented differentiate the pension amount depending on the insurance period and additionally paid contributions. The paper proposes to extend the special branches of agricultural production and to adopt income they generate at the level of 50% of the average salary in the national economy or at the level of the minimum wage as a criterion for access to insurance in KRUS.

The broadening and toughening the legal requirements as the result of an continuing reform of the pension insurance system which are necessary for accrual the right to them in the coming years will contribute to the growth of the number of trials with the subdivisions of the Pension Fund of Russia. Note that in the actual system of facts that determine the right to an insurance pension, the individual retirement coefficient (IRC) is the most difficult of pension legal relations cases, which requires the formation of new competencies for judges and the development of uniform practice. The purpose of the work is to find effective models of law enforcement, means and methods of protecting the right that eligible of the citizens' interests and standarts-driven of civil trial. The issue of the research are to analyze the effective procedural proceedings applicable to the IRC confirmation. The research is based on open sources of information, including statistical data, special literature, normative legal acts and judicial practice, using General scientific (theoretical and empirical level: dialectical, observation, description) and special legal methods (comparative legal, formal legal, legal modeling) of the study. The article contains grounds of the perfection and ensuring of the systemacy of the individual provisions of the Russian social security law. It concluded that the legal investigation of relevant cases could be carry out both in the action proceedings or special proceedings. The proper mechanism for establishing an individual pension coefficient in the action proceeding should be considered claims for admission illegal the refusal of pension's fixing, as well as for forcing the policyholder (employer) to pay insurance fee. Also proposed to allow in some cases confirmation of the IRC in the order of special proceeding.

This article shows how the relatively new concept of Perfect Withdrawal Rate can be used in assessing the appropriate sustainable withdrawal amounts from a pot of wealth. This concept can be applied equally to private retirement funds, endowments, and charities—and indeed in any context requiring regular withdrawals from an initial source of funds. The subject of estimating sustainable withdrawal rates usually falls back on describing the likely minimum safe withdrawal possibilities for various portfolio constructions over different decumulation periods. This analysis employs either a long period of historical data or a recombination of data in the form of Monte Carlo simulations. To illustrate the power of the Perfect Withdrawal concept, the article considers the case of someone who initiated retirement on January 1, 2000, at age 65 and, with the benefit of actual investment returns, assesses investment and withdrawal rate options and lessons to be learned from this experience. The article also introduces the concept and a methodology for purchasing a delayed annuity so that at age 85 (on December 31, 2019), the hypothetical retiree is fully transitioned from investment income to annuity income for the rest of their life, no matter how long that may be. TOPICS:Retirement, pension funds, foundations & endowments, quantitative methods, simulations Key Findings ▪ The introduction of delayed annuities into retirement planning helps complete analysis of the decumulation experience. ▪ The larger the sum required for a delayed annuity, the more variable the final withdrawals in the decumulation journey become. ▪ The delayed annuity purchase amount is a moving target; withdrawal amounts have to adapt in the attempt to meet the objective.

Purpose Deferred annuities, which offer longevity insurance with relatively low premiums, are a potential payout option in defined contribution (DC) pension plans in Japan. This study aims to measure individual preferences for these annuities. Design/methodology/approach This study conducts stated choice experiments using an original internet survey. This methodology provides a decision-making scenario similar to that faced by individuals when making real retirement saving decisions. Subjective valuations of deferred, immediate and term annuities are compared. Findings This study finds that male individuals have an insignificant preference for deferred annuities – the benefits of which begin at an advanced age. On average, deferred annuities are considered a gamble, betting against life and individuals who are married and have higher financial assets tend to value them less. Originality/value While previous studies, based on theory and simulations, have found that deferred annuities should be included in individual retirement assets, this study examines annuity preferences from the demand side (i.e. DC plan participants) –an approach that has not been addressed in the literature.

In this paper, we mainly focus on the valuation for the risk-based premium of private pension plan with termination provided by the Pension Benefit Guaranty Corporation (PBGC). The dynamics for ass...

In this paper, we analyse retirees’ decision-making from the different bids made available by life insurance companies in the Chilean annuity market. We find that choosing the highest annuity payout was positively (negatively) correlated with the advice given by independent brokers (sales agents and average years of education in the municipality) for a January 2008–May 2018 sample. We also found that retirees were willing to pay for firm reputation. In addition, people who are more likely to take a pension payout without consulting intermediaries are older, married, have a higher pension balance and purchase an immediate annuity. These findings are of interest to those seeking to improve the efficiency and effectiveness of the annuity system.

To correctly measure the effect of mortality rates on the stability of insurance and pension provider's financial risk, longevity risk should be considered. This paper aims to investigate the future mortality and longevity risk with different age structures for different countries. Lee-Carter mortality model is used on the historical census data to forecast future mortality rates. Turkey, Germany, and Japan are chosen concerning their expected life and population distributions. Then, the longevity risk on a hypothetical portfolio is assessed based on static and dynamic mortality table approaches. To determine the impact of longevity risk, which is retrieved using a stochastic mortality model, a pension insurance product is taken into account. The net single premium for an annuity is quantified under the proposed set up for the selected countries. Additionally, the credibility approach is proposed to establish a reliable estimate for the annuity net single premium.

This paper presents the theoretical foundations of quality management systems and it’s realization in the pension system area. The aim of this paper is to present the processes, analyze the most significant problems and propose protective measures to improve implementation of the pension and disability insurance system.

The regulator in Europe calls for the market-consistent valuation of the insurance liabilities that usually are not (fully) tradable. An example of such liabilities is the participating pension contract that is generally long-dated and vulnerable to the medium-time dynamics of the underlying risk drivers. Dealing with these characteristics requires time-consistent pricing. However, the well-known non-linear premium principles, often used as pricing operators, are not time-consistent. Based on this motivation, we study the time-consistent and market- consistent (TCMC) actuarial valuation of the participating pension contracts with hybrid payoff. We use a standard profit-sharing mechanism with guaranteed interest rate, and generalize it to a hybrid profit-sharing mechanism with the actuarial and hedgeable financial risks, over the course of the contract. Market-consistency is maintained by "two-step actuarial valuation" in a one-period setting. Time-consistency is obtained by a "backward iteration" of these one-period two-step valuations over the predetermined sub-intervals of the valuation period. We use the Least-Square Monte-Carlo method to implement the conditional operators in the backward iteration. We compare the results of TCMC price to the expected value of the discounted payoff and measure the relative risk loading and time-consistency risk premium. Besides, we investigate the effect of the stochastic interest rate as compared to the deterministic one.

Individuals make inconsistent, irrational financial decisions mainly due to disproportionate time preferences. Bias and procrastination prevail. Along with a default option, there is a need for a customized plan with individuals' socio-cultural and economic status. Low participation rates are mainly due to a lack of awareness of pension literacy and behavioral aspects. Individuals have failed to create a corpus to protect themselves for retirement as there is a lack of awareness to suitability of a plan to one’s situation, failure to measure income adequacy at retirement, not able to identify the link between contributions made and pension drawdown, etc. Age and gender differences prevail strongly. Defined contribution plans are likely to dominate in global pension model in the years to come. Individuals are ready to own their risk but have little control and knowledge to cover themselves. Frequent timely and prompt advice or counseling from investment advisors will enable participants to understand the need, identify suitable options and schemes, and provide themselves with sustainable long-term savings. This should convert willingness to participate to real participation. Keywords: Financial literacy, Pension knowledge, Defined contribution pension plans (DCP), irrational decision making, demographics.

Pension de‐risking strategies have been widely adopted by firms with defined‐benefit (DB) pension plans to reduce pension risk. This paper investigates the influence of board composition on pension de‐risking strategies within the UK, focusing particularly on three strategies: changes to pension asset allocations, switches from DB to defined‐contribution (DC) pension plans and pension buy‐ins and buy‐outs. Our findings suggest that firms with larger boards and more independent directors are less likely to invest their pension assets in equities. Survival analysis shows that firms with larger boards are slower to switch from DB to DC pension plans. This is consistent with stakeholder theory, in that firms with large boards or more independent directors are more likely to protect employees’ benefits when de‐risking their DB pension plans. However, firms with more female directors are faster to switch fully from DB to DC pension plans and slower to engage in pension buy‐in and buy‐out transactions. This suggests that female directors encourage fully switching DB pension plans, while they are concerned with the significant costs of pension buy‐in or buy‐out. This research provides clear evidence that pension de‐risking strategies are influenced by board composition. UK pension trustees play a key role in determining switches from DB to DC pension plans, mitigating the impact of independent directors.

This article is an analysis of 31 defined benefit police and fire pension plans of 20 municipalities in Florida. The authors conducted a similar assessment of these same plans ten years earlier to determine the fiscal impact of these plans due to state mandates that accompany state funding for each of these plans. The current study analyzes key measures of fiscal health over the last ten years for these same plans to ascertain whether the fiscal condition of these plans remained constant, that is, whether underfunded plans continued to be questionably managed and whether well-funded plans continued to be fiscally stable considering economic trends and the lessening of state mandates on the use of state funding for these plans. The findings show that the overwhelming majority of the plans neither significantly changed their financial condition nor their general ranking among the plans evaluated.

Using funded and unfunded pillars, the optimal pension structure is estimated using an over-lapping generation model, calibrated to the average OECD countries. While simulating different pillar sizes, a socio-economic characteristic was revealed in which low-earning groups are prone to unexpected market risks than high-earning cohorts and support a larger contribution than better-off individuals. This led to high contribution rates for funded pillars and low contributions rates for social security pillars. This suboptimal allocation leads to inefficient hedging capability for the pension portfolio. An alternative is a minimum pension guarantee as an efficient system stabilizer as it rebalances the economic cost among different earning cohorts. However, the guarantee might be expensive to implement if not capitalized early in the working phases in an era of aging populations, low birth rates, and deep financial crisis.

We develop a model for asset liability management of pension funds, which is solved by stochastic programming techniques. Using data provided by the Parliamentary Pension Scheme of Uganda, we obtain the optimal investment policies. Randomly sampled scenario trees using the mean, and covariance structure of the return distribution are used for generating the coefficients of the stochastic program. Liabilities are modelled by remaining years of life expectancy and guaranteed period for monthly pension. We obtain the funding situation of the scheme at each stage under three different asset investment limits.

Research background: The role of supplementary pension systems in providing adequate income in old-age is increasing significantly. They are frequently analysed, but rather in terms of architecture, product forms, assets under management or tax incentives than in terms of their efficiency, costliness or readability for individuals. Purpose of the article: The first aim of this paper is to evaluate individual retirement products in Poland regarding their linguistic readability and transparency, investment efficiency and costliness. Moreover, we examine whether there is any correlation between the analyzed characteristics of contracts that would suggest an intentional strategy by financial institutions to hide low efficiency and high costs. The second aim of the article is to assess which individual retirement products are similar to each other and which are significantly different. The research covers two types of individual retirement products (IKE and IKZE) offered at the beginning of 2017. Methods: We used the ?Jasnopis? linguistic analysis tool to assess the difficulty level of the language used in the contracts and we conducted desk-research to analyse their transparency. We indicated the costliness and efficiency of the products by calculating the 5-year cost ratios and real average 5-year rates of return. To examine the relations between the characteristics of pension contracts, we used the Spearman's rank correlation coefficient and then verified its significance with a non-parametric test. Moreover, to identify groups of products that are similar to or different from each other, Ward's method was used. The study includes nearly 90% of all individual retirement products offered in Poland. Findings & value added: For both types of retirement products studied (IKE and IKZE), we found that the more readable a contract is, the higher its rate of return is and the higher the costs charged are. Moreover, the more readable a contract is, the more transparent it is. The findings of the study provide financial institutions, the supervisor and creators of social policy with information on market imperfections and recommendations how to improve the individual retirement products offered on the market. Our research makes a unique contribution to the multidimensional research of supplementary pension systems. It also develops the understanding of how to successfully use linguistic tools in complex analyses of financial services. The results of the hierarchical cluster analysis proved that both IKE and IKZE products differ substantially and their features generally do not depend on the type of the financial provider.

This paper studies how the rates of deduction for early retirement have to be determined in pay-as-you-go (PAYG) systems in order to keep their budget stable. The derivation of these deductions requires the use of a multiperiod intertemporal budget constraint that involves assumptions about the retirement behavior of past, present, and future cohorts. In general, it is not possible to calculate budget-neutral deductions from the budget constraint of a single individual who retires before the target retirement age—an approach that dominates the related literature. Only for specific cases one can use this second approach but then one has to adjust the discount rate to the assumption about collective retirement. If there is only one deviating individual, then the right choice is the market interest rate while for a stationary retirement distribution it is the internal rate of return of the PAYG system. In this case, the necessary deductions are lower than under the standard approach. This is also true for retirement ages that fluctuate randomly around a stationary distribution. Various long-run developments (e.g., increases in life expectancy or permanent changes in the average retirement age) might cause challenges for the sustainability of the pension system. These developments, however, can only be dealt with by adequate adjustments to the basic pension formulas and not by the use of deduction rates.

This article presents a quantitative portrait of the Canadian pension fund model. The authors show that, between 2004 and 2018, Canadian pension funds outperformed their international peers in terms of both asset performance and liability hedging. A central factor driving this success is the implementation of a three-pillar business model that consists of (1) managing assets in-house to reduce costs, (2) redeploying resources to internal investment teams for each asset class, and (3) channeling capital toward growth assets that increase portfolio efficiency and hedge liability risks. This model works best for funds whose pension liabilities are indexed to inflation. TOPICS:Pension funds, portfolio theory, risk management, performance measurement Key Findings ▪ From 2004 to 2018, Canada’s pension funds outperformed their peers in terms of investment performance and insurance against liability risks. ▪ The Canadian model is cost efficient, not low cost. Canadian funds reduce costs by managing assets in-house and then redeploy resources by growing their internal capabilities and allocating more capital to strategic assets. ▪ The Canadian model works best for funds whose pension liabilities are indexed to inflation.

The global reforms to public pension schemes over the last thirty years have progressively reduced individuals’ post-retirement social security income. In order to compensate for this, individuals join pension funds and individual plans to increase their wealth at retirement. These types of fully funded plans generally give individuals the opportunity to withdraw the capital accumulated into their scheme or to convert it into an annuity. In this paper, we analyse individuals’ post-retirement choices to allocate the wealth at retirement between consumption, risk-free investments and a life annuity. We develop a discrete time optimisation model, in a deterministic framework, with a constant relative risk aversion (CRRA) utility function. We study the effect of a bequest motive and the annuity rate used by the insurer on the optimal choice. Several numerical applications are presented to illustrate the optimal annuitisation decision results and the optimal consumption paths.

We conduct a returns-based [Sharpe, 1988] , [Sharpe, 1992] style analysis of U.S. corporate defined benefit pension plans. The returns for corporate pension funds are reported only once per year, limiting the degrees of freedom for a returns-based style analysis. To address this problem, we introduce a “Search” method that systematically tests all possible combinations of a limited number of factors (market indices) to find the set with the highest explanatory power of historical returns. We find that pension funds exhibit significant exposure to private equity, much more so then balanced funds. We provide a new approach to measuring the relative contributions of policy and active management by using squared partial correlation coefficients to control for market movements. We find that pension funds show more active management compared to balanced funds.

Este artículo tiene como objetivo discutir los principales conceptos relacionados con los modelos de contribución definida nocional (CDN) y analizar las experiencias de Suecia, Italia, Letonia, Polonia y Noruega. La metodología se basa en una revisión de la literatura. El principal resultado encontrado fue que la extensión de los modelos CDN como alternativa a los sistemas de pensiones depende del grado de proximidad al modelo genérico. Se recomienda analizar el modelo CDN como una alternativa para las reformas de los sistemas de pensiones considerando su capacidad para controlar los déficits estructurales. Como limitación, no se analizaron los posibles impactos sociales de la introducción de estos modelos. Este artículo es original porque cubre aspectos teóricos y prácticos de los modelos CDN. Se espera que este trabajo pueda contribuir a ayudar a los administradores públicos a tomar decisiones sobre reformas en los sistemas de pensiones.

Economic scenario generators (ESGs) for equities are important components of the valuation and risk management process of life insurance and pension plans. Because the resulting liabilities are ver...

The paper investigates the veracity of the hypothetical expectation that the implementation of the Pension Reform Act of 2004, as amended, would lead to a quantum growth in the premium base of the Nigerian insurance industry. Given that prior research had confirmed the power of mandated contributory pension scheme to facilitate growth of the financial sector, the paper argued that the insurance industry, being a subsector of the financial system, would experience its fair share of the expected growth. Employing annual gross premium as a proxy for insurance industry growth and measured over a span of eleven years (2005-2015), regression analysis of data showed that premium income of insurance industry had a positive and no significant relationship with contributory pension scheme (β = 0.8496; t = 1.8282; p = 0.1415 ≥ 0.05). The result not being significant at 5% could be traced to two related factors, namely, the manifest reluctance shown by MDAs and other public sector employers to comply with the provisions of section 9(3) of the Pensions Reform Act, 2004 and the failure of PFAs to expose the early retiring workers to the annuity option of pension payment structure; this hamstrung the growth of the annuity business, a major component of the insurance industry in Nigeria. The paper therefore recommends that pension regulatory authorities in Nigeria should compel strict compliance with the relevant provisions of the Act in order for the insurance industry to experience the expect quantum growth.

Predictive risk assessment and risk stratification models based on geodemographic postcode-based consumer classification are widely used in the pension and life insurance industry. However, these are static socio-economic models not directly related to health information. Health information is increasingly used for annuity underwriting in the UK, using health status when the annuity is purchased. In real life, people develop new health conditions and lifestyle habits and can start and stop a certain treatment regime at any time. This requires the ability to dynamically classify clients into time-varying risk profiles based on the presence of evolving health-related conditions, treatments and outcomes. We incorporate landmark analysis of electronic health records (EHR), in combination with the baseline hazards described by Gompertz survival distributions, for dynamic prediction of survival probabilities and life expectancy. We discuss a case-study based on landmark analysis of the survival experience of a cohort of 110,243 healthy participants who reached age 60 between 1990–2000.

Соколова, Ю. І. До проблеми визначення місця пенсійного забезпечення в системі соціальних гарантій суддів / Соколова Ю. І. // Науковий вісник публічного та приватного права. – 2021. - Вип. 4. – С. 77-81. - DOI: https://doi.org/10.32844/2618-1258.2021.4.13.

The introduction of pan-European pension products in 2020 is associated with an ongoing debate on prescribing predefined saving strategy that would both deliver adequate performance and limit the down-side risk at the end of the saving horizon. Dynamic life-cycle saving strategies are generally accepted as a good risk-mitigation tool that can be individually set. Many research papers confirm the ability of life-cycle strategies to deliver high risk-reward outcomes. Objective of our paper is to test the ability of one-factor life-cycle saving strategies based on the age and/or the remaining saving horizon to deliver the promised value for PEPP savers. We constructed 18 saving strategies divided into three groups – static saving strategies with fixed proportion of equities, dynamic life-cycle strategies based on the age and/or remaining saving horizon, and quasi-active strategies combining two factors – the remaining saving horizon and price movement. We employed the model based on moving-block bootstrapping technique and performed simulations for various economic conditions. We have tested the expected saving performance combined with the down-side risk during the saving horizon. Our findings do not confirm the general findings on life-cycle saving strategies. We claim that having the age as the only factor defining the proportion of equities in the pension saving portfolio would not be optimal. However, we found that two-factor saving strategies look promising in delivering both lower down-side risk and higher performance over the saving horizon.

The impact of longevity risk has not been well studied in most developing countries because of the lack of suitable mortality data. As a result, most pension companies in these countries (especially those on the African continent) do not account for longevity risk in their annual valuation. This can even lead to their collapse if steps are not taken to address it. In this work, we develop a method of assessing longevity risk where there is a severe lack of mortality data. The method is based on the assumption that there is a nearly linear relationship between annuitant’s hazard function and their mortality at higher ages (postretirement age), which permits approximating with the Gompertz model. We tried the method on mortality data from Ghana, and the results are consistent with those in the standard literature. That is, longevity risk is a treat to pension companies in Ghana even though, in the case of Ghana, this treat has partially been mitigated by the high-interest rate in the country. With this method, pension and life companies that are not able to account for longevity risk as a result of lack of data or newly formed pension companies with even 2-year mortality data will be able to assess the longevity risk they face without relying on data or models from other countries. TOPICS:Long-term/retirement investing, pension funds, risk management, frontier markets Key Findings ▪ Longevity risk is present in Ghana, and its impact on life companies in the country is potentially high. ▪ Unlike most developed countries, longevity risk in Ghana has partially been mitigated by the high interest rate in the country. ▪ Ghana’s postretirement mortality could be approximated with the Gompertz model.

For several decades, pension systems across the world have been undergoing reforms. The main reasons for this are demographic changes and increasing life expectancy. As life expectancy increases and the birth rate decreases, more people retire than are added to the workforce. To make these reforms more effective and ensure that they are based on the best benchmarks, the European Union (EU) has introduced the Open Method of Coordination (OMC) in the field of pensions. Pension system reform is on its way in Georgia since 2019, January. OMC evaluates pensions systems in terms of the three main objectives: adequacy, sustainability, and modernization of pensions. Our methodology is based on multivariate statistical analysis, and employs synthetic indicators for adequacy objectives, in case of Georgia and 27 EU countries, in the years 2010, 2015 and 2018. The article contributes to the existing literature on pension reforms through investigation of the convergence of EU27 and Georgia pension systems in terms of one of the OMC objectives, in order to evaluate the adequacy of the pension systems.

What is the optimal default contribution rate or default asset allocation in pension plans? Could active decision (i.e., not setting a default and forcing employees to make a decision) be optimal? These questions are studied in a model in which each employee is biased regarding her optimal contribution rate or asset allocation. In this model, active decision is never optimal and the optimal default is, depending on parameter values, one of three defaults. The paper also explores how the parameters affect the optimal default and the total loss in the population at the optimal default.

This article investigates the causes of the “high-fee puzzle,” which is that some people pay high-fees for financial advice and financial products when lower-fee advice and products are available. We hypothesize that lack of awareness of the size of the effect of fees on account balances is one cause. We survey college students with business-related majors, asking them questions on the effects of fees on account balances, as well as standard financial literacy questions. We find that only one-third of students are able to answer the fee questions correctly; three-quarters correctly answered the common financial literacy questions. We tested whether people understand the importance of fees when fees are presented in a simple, transparent manner. Our results suggest that policies to require simple, transparent fee disclosures may be more effective if more people understood the importance of fees. For pension participants, our results suggest the importance of investment menus excluding high-fee options and focusing on low-fee options. TOPIC:Retirement Key Findings ▪ We find widespread lack of knowledge concerning the size of the effect of fees on future account balances. ▪ This lack of knowledge may explain the “high-fee puzzle,” where people pay high-fees for financial products and advice when lower-fee alternatives are available. ▪ For pension participants, our results support the importance of investment menus excluding high-fee options and focusing on low-fee options.

The retirement systems in many developed countries have been increasingly moving from defined benefit towards defined contribution system. In defined contribution systems, financial and longevity risks are shifted from pension providers to retirees. In this paper, we use a probabilistic approach to analyse the uncertainty associated with superannuation accumulation and decumulation. We apply an economic scenario generator called the Simulation of Uncertainty for Pension Analysis (SUPA) model to project uncertain future financial and economic variables. This multi-factor stochastic investment model, based on the Monte Carlo method, allows us to obtain the probability distribution of possible outcomes regarding the superannuation accumulation and decumulation phases, such as relevant percentiles. We present two examples to demonstrate the implementation of the SUPA model for the uncertainties during both phases under the current superannuation and Age Pension policy, and test two superannuation policy reforms suggested by the Grattan Institute.

We deploy a stochastic life‐cycle model to examine how the superannuation guarantee (SG) impacts on welfare for Australian superannuation fund members under a reference‐dependent utility function that evaluates consumption relative to target, allowing for existing superannuation, taxation and Age Pension eligibility rules. The analysis highlights how the optimal SG can vary substantially with pre‐retirement income, the post‐retirement consumption target and various other assumptions. We conclude that no single SG rate is appropriate for all members and suggest that the main reason for increasing the SG above 9.5 percent would be an aim of replacing the Age Pension where possible.

The right to survivor’s benefits is one of the basic rights from the pension and disability insurance, which is provided to the family members of the deceased insured, under the conditions determined by the Law on Pension and Disability Insurance of the Republic of Serbia. This Law was adopted in 2003, but since then the National Assembly has adopted numerous amendments to this regulation, including amendments adopted in December last year, in connection with the exercise of the right to surv...