scholarly journals SINGAPORE’S LIFE PROGRAM: ACTUARIAL FRAMEWORK, LONGEVITY RISK AND IMPACT OF ANNUITY FUND RETURN

2017 ◽  
pp. 1-17 ◽  
Author(s):  
KOON-SHING KWONG ◽  
YIU-KUEN TSE ◽  
WAI-SUM CHAN
Keyword(s):  
Pension System ◽  
The Elderly ◽  
Pension Scheme ◽  
Longevity Risk ◽  
Defined Contribution ◽  
Lifetime Income ◽  
Fund Return ◽  
Provident Fund

The Central Provident Fund (CPF) is a defined-contribution savings plan forming the key pillar of the pension system in Singapore. The CPF Lifelong Income For the Elderly (LIFE) program, which provides lifetime income for retirees, is a mandatory pension scheme for all Singapore residents. In this paper we construct an actuarial framework to analyze the LIFE program. We use this framework to study the plan payout outcomes with respect to changes in mortality and annuity fund return assumptions. We also examine the effects of some possible changes in the program on the payouts and bequests.

scholarly journals Addressing Longevity Risk: How Best to Annuitize Defined Contribution Assets?

2020 ◽  
Vol 4 (Supplement_1) ◽  
pp. 686-686
Author(s):  
Alicia Munnell ◽  
Gal Wettstein ◽  
Wenliang Hou
Keyword(s):  
Social Security ◽  
Longevity Risk ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Economics Of Aging ◽  
Distribution Rules ◽  
Lifetime Income ◽  
The Social ◽  
Defined Benefit Pensions ◽  
Deferred Annuity

Abstract Unlike defined benefit pensions, 401(k) plans provide little guidance on how to turn accumulated assets into income. The key risk that retirees face is outliving their assets. Insurance against such risk is available through several routes, including immediate annuities, deferred annuities, and additional Social Security through delayed claiming. Under this Social Security bridge option, participants would tap their 401(k) for payments equal to their Social Security to delay claiming. This paper compares these three options in simulations against a baseline in which no assets are used to obtain lifetime income. In each option, assets not allocated to purchasing lifetime income are consumed following the Required Minimum Distribution rules. The analysis finds that, when market and health shocks are included alongside longevity uncertainty, the Social Security bridge option is generally the best for households with median wealth. Wealthier households can benefit from combining the bridge option with a deferred annuity. Part of a symposium sponsored by the Economics of Aging Interest Group.

scholarly journals The Current Situation of the Reform on World Public Pension and Its Enlightenment to China

2018 ◽  
Vol 2 (1) ◽  
pp. 16 ◽  
Author(s):  
Shuna Liu
Keyword(s):  
Elderly Population ◽  
Total Population ◽  
Pension System ◽  
Emerging Market ◽  
The Elderly ◽  
Pension Scheme ◽  
Retirement Income ◽  
Emerging Market Countries ◽  
Formidable Challenge ◽  
Old Age Poverty

From a worldwide perspective, the proportion of the elderly in the total population is increasing. How to maintain the adequacy and fnancial sustainability of pension system will be a formidable challenge for all countries. Most OECD (the Organization for Economic Cooperation and Development) countries and many emerging market countries have reformed their pensions system. Structural reforms and parametric reforms are main reform measures. Meanwhile, employment promotion of the elderly and alleviating old age poverty are drawing much more attention. It can be concluded that , on the basis of empirical analysis of other countries' reforms and comparative analysis, China should combine measures of raising the retirement age with promoting the age management ; and lower the poverty of older people to ensure that the elderly population can receive adequate retirement income; and extend the coverage of voluntary pension scheme to attract more labor force employed in informal sectors to participate in ,thus increasing retirement income eventually

scholarly journals The transition to NDC in Italy: assessing distributive and financial effects

2021 ◽  
pp. 1-16
Author(s):  
Carlo Mazzaferro
Keyword(s):  
Net Present Value ◽  
Pension System ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Ratio Distribution ◽  
Actuarial Fairness ◽  
Notional Defined Contribution ◽  
High Level ◽  
Pension Benefits

Abstract Moving from a Defined Benefit (DB) to a Notional Defined Contribution (NDC) pension formula creates significant re-distributive effects. We estimate the amount and the intensity of these effects in the case of the Italian transition to NDC, which began in 1995. Based on administrative data of the main Italian pension scheme (FPLD), we study the evolution of yearly inequality within old-age pension benefits. Furthermore, we study the adequacy and the actuarial fairness of the pension system, by estimating the replacement rates and the Net Present Value Ratio distribution for workers who retired in the period 1996–2019. Our results show that the very generous interpretation of acquired rights determined by the 1995 reform has contributed to maintaining a high level of adequacy and a significant level of intergenerational imbalance. The financial costs of this imbalance are estimated and its extent is significant.

scholarly journals Does the New Rural Pension Scheme improve residents’ livelihoods? Empirical evidence from Northwestern China

PLoS ONE ◽  
2021 ◽  
Vol 16 (4) ◽  
pp. e0250130
Author(s):  
Yan Chen ◽  
Lisheng Zhao ◽  
Yubing Fan ◽  
Bingxue Xie
Keyword(s):  
Sustainable Development ◽  
Pension System ◽  
The Elderly ◽  
Northwestern China ◽  
Pension Scheme ◽  
Policy Reforms ◽  
Replacement Rate ◽  
The Sustainable Development ◽  
Aged People ◽  
Financial Perspective

The sustainable development of pension systems has been investigated from a financial perspective worldwide. However, the pension adequacy and its effect on the sustainability of a national pension system are still understudied. Using actual replacement rate and modified living standards replacement rate, this study empirically evaluates whether China’s New Rural Pension Scheme (NRPS) grants enough livelihood protection for the rural residents in the Northwestern China. The results show that the NRPS fails to meet the basic needs of the elderly people (i.e., age of sixty years or older) or the middle-aged people (forty-five to fifty-nine years old), while it only provides limited protection for the young people (sixteen to forty-four years old). These findings suggest that the current NRPS benefits are very low in the Northwestern China and policy reforms should be further implemented to improve the sustainable development of the New Rural Pension Scheme.

scholarly journals A Simulation Study of the Effect of Delayed Retirement on Welfare of the Elderly: Evidence from China

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110169
Author(s):  
Zheng Shen ◽  
James Yang
Keyword(s):  
Pension System ◽  
Well Being ◽  
The Elderly ◽  
Future Research ◽  
Transfer Payment ◽  
Chinese Government ◽  
Intergenerational Support ◽  
Defined Contribution ◽  
The Social ◽  
Retirement Policy

In order to cope with population aging and emerging labor shortages, the Chinese government may soon introduce a policy to address this problem by raising the normal retirement age. However, the effects of planning for delayed retirement on the welfare of the elderly remain unknown. From an intergenerational support perspective, we develop a dynamic optimization model that can simulate changes in the welfare of the elderly over the years under different delayed retirement scenarios. Simulation results show that delaying retirement will produce a detrimental effect on old-age welfare. We further analyze strategies to mitigate this adverse effect and improve people’s welfare. First, the delayed retirement policy should raise the pension replacement rate, which could transfer part of the social welfare improvements from delayed retirement to the elderly through the transfer payment mechanism. Second, when adopting a defined-contribution pension system, the delayed retirement could increase the welfare of the elderly and the social well-being. Implications for future research and public policies concerning welfare effects of delayed retirement are discussed.

Drohende Altersarmut – neue Aufgaben für die Rentenversicherung?

2012 ◽  
Vol 61 (2) ◽  
Keyword(s):  
Life Expectancy ◽  
Old Age ◽  
Equivalence Principle ◽  
Pension System ◽  
The Elderly ◽  
Pension Scheme ◽  
Pension Insurance ◽  
Poverty Risk ◽  
Employment Trajectories ◽  
Old Age Poverty

AbstractOliver Arentz and Steffen Roth state that poverty among the elderly is currently an exception in Germany. Nevertheless, it is foreseeable that future pensioners will have less income and assets at their disposal. Reasons are the effects of the demographic change to the pay-as-you-go pension scheme, gaps in employment biographies and low pay employment. With that in mind, they discuss the reform package advocated by the Federal Ministry of Labour and Social Affairs. Furthermore they derive guidelines for a sustainable reform of the pension schemes.Bert Rürup also argues that poverty in old age is up to now not a relevant social problem in Germany. Nevertheless, there are clear indications that poverty among the elderly will increase in the future due to a bundle of reasons. Because of this there is no silver bullet to solve this problem. In the conception of an adequate strategy to reduce and to prevent a rise of poverty in old age, however, the equivalence principle as the basic principal the German statutory pension scheme has to be questioned critically.Jan Goebel gives an overview of the current development of old-age poverty in Germany and classifies widely discussed concepts for the reform of statutory pension insurance. Although current indicators generally point to an increase in old-age poverty, the empirical data show no growth at present in poverty risk for persons aged 65 and older. However, it is expected that the income position of older people will be worsen due to the declining pension payments of new retirees and the increase in discontinuous employment trajectories as well as the insufficient spread in private old age provision. One of the reforms discussed for preventing rising poverty risks in old age is to consider life expectancy in the pension formula. This appears to be a promising means of reducing inequality within the group of pensioners, he states. The implicit redistribution within the statutory pension system due to the empirically well-known correlation between living standards and life expectancy will decrease, and the equivalence principle can be strengthened.

The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison

2018 ◽  
Vol 19 (4) ◽  
pp. 365-382 ◽  
Author(s):  
Vera Gurtovaya ◽  
Sergio Nisticò
Keyword(s):  
Pension System ◽  
Pension Scheme ◽  
Point System ◽  
Defined Contribution ◽  
Rates Of Return ◽  
System A ◽  
Analytical Properties ◽  
Notional Defined Contribution

AbstractThis paper examines the analytical properties of the German ‘points-based’ pension system. These properties are compared with those of a canonical Notional Defined Contribution (NDC) pension scheme. The paper identifies the circumstances under which the German ‘points-based’ system would mimic a Swedish-type NDC scheme and verifies to what extent the German ‘points-based’ scheme ensures uniformity of individual rates of return for some hypothetical careers. Finally, the paper proposes a set of new possible adjustment rules able to increase similarity between the German point system and the NDC scheme.

scholarly journals Chile's private pension system at 35: impact and lessons

2016 ◽  
Vol 32 (1) ◽  
pp. 57-73 ◽  
Author(s):  
Silvia Borzutzky ◽  
Mark Hyde
Keyword(s):  
Pension Fund ◽  
Pension System ◽  
Transition To Democracy ◽  
The State ◽  
Private Pension ◽  
Pension Scheme ◽  
Defined Contribution ◽  
Funded Pensions ◽  
Massive Accumulation ◽  
Private Pension System

This paper provides an analysis of Chile's 35 year experience with defined contribution, fully funded pensions and argues that this pension approach should not be emulated by countries seeking to reduce the state role in the provision of pensions. The paper shows that 35 years of privatized pensions have led to a massive accumulation and concentration of capital and profits in the hands of the pension fund administrators and insufficient and unequal pensions for the retirees. This legacy of the Pinochet dictatorship has experienced marginal reforms after the transition to democracy. However, those reforms have not altered the system's structure and have augmented the fiscal role as the state attempts to repair some the most damaging outcomes of the private pension scheme.

Der neoliberale Rentenkonsens in Deutschland und seine Genese

2017 ◽  
Vol 47 (187) ◽  
pp. 309-324
Author(s):  
Christian Christen
Keyword(s):  
Old Age ◽  
Pension System ◽  
Cost Effective ◽  
The Elderly ◽  
Transformation Process ◽  
Economic Effects ◽  
Pension Scheme ◽  
Core Element ◽  
Economic Developments ◽  
The Moment

The reform of the old age pension scheme the last twenty years was part of an international transformation process of the old-age insurance systems since the 1980s. The core element is the conversion from the pay-as-you-go systems to capital-funded models with a shifting to individual provision and risk taking. This politically intended break shows fatal distributional and economic effects in the present. Neither a more stable, more cost-effective, more efficient old-age insurance could be established for the majority of employees, nor did the capital market-financed pension system automatically promote innovation and economic growth. In the end, most of the political promises and allegations of the reformists have already been rejected by real social and economic developments. Poverty among the elderly will rise in the near future dramatically due to the deformation of the statutory pension system, the great distortions on the labour market and rising inequality. Nevertheless, the pension consensus still holds at the moment but a radical paradigm shift and a clear revision of past reforms are overdue. 

scholarly journals The impact of notional defined contribution system (NDC) from the point of view of individual

2014 ◽  
pp. 96-105
Author(s):  
Milda Švedienė ◽  
Astrida Slavickienė
Keyword(s):  
Interest Rate ◽  
Pension System ◽  
Labour Force ◽  
Point Of View ◽  
Pension Benefit ◽  
Pension Scheme ◽  
Retirement Age ◽  
Defined Contribution ◽  
Notional Defined Contribution ◽  
The Impact

Retirement benefit plans are the relevant theme in the world and in Lithuania as well. The demographic challenges such as ageing and shrinking labour force cause the problem which usual PAYG system is not able to solve. Whereas this problem is very important in Lithuania simulation of notional defined contribution system is suggested. The influence of new pension system to individuals is analysed in this paper.  The analysis of theoretical works showed that NDC system is defined contribution (DC) system financed as in pay-as-you-go (PAYG) system. This pension scheme is different from others because of it accounting mechanism: contributions of individuals are accumulated on their individual accounts but whereas real capital is not accumulated the balance is notional. All accumulated sum is converted to pension benefit when individuals are at retirement age depending on cohort’s life expectancy. It is said that NDC pension system helps to solve problems such as sensitivity to changes in economic growth, decreasing volume of savings or create a better link between contributions and benefits.  Nevertheless it is recognized that benefit return in NDC pension system is less than in usual defined contribution system. The results of simulation have showed that notional defined contribution system in Lithuania would not be the way out from problems in pension system. The system would be balanced in 30-year period and indexation would be acceptable for individuals but from 2040 interest rate would be reduced by the relevant part of the balance ratio. Depending on the changes in interest rate from 2040 notional capital would be less than all sum of contribution paid and it would negatively impact individuals’ finances. It was found that the more years individuals spend in labour market the bigger capital they accumulate and the bigger benefit get when they are at retirement age. Nevertheless it was noticed that replacement rate would be approximately 25 percent and it would not be adequate for the required use of retirees.

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