Further Reform of China’s Pension System: A Realistic Alternative Option to Fully Funded Individual Accounts

2007 ◽  
Vol 6 (2) ◽  
pp. 112-135
Author(s):  
Wei Zhang
Keyword(s):  
Capital Market ◽  
Pension System ◽  
Defined Contribution ◽  
Management Skills ◽  
Pension Insurance ◽  
Individual Account ◽  
System A ◽  
Financial Difficulties ◽  
The Individual

China's newly established three-pillar pension system consists of: basic pension; fully funded individual account; and voluntary commercial pension insurance. The second component faces immense financial difficulties caused by transitional costs in the short term and demographic changes in the long term. In addition, the inefficiency of the current capital market and the lack of fund management skills mean that these financial problems are unlikely to be solved within the existing framework of the fully funded individual account. This paper suggests another option—changing the fully funded individual account to a notional defined contribution individual account that operates on a pay-as-you-go basis. This change will keep the advantages of the individual account and avoid the huge risks caused by China's immature capital market.

scholarly journals Methods of Combating the Legalization of Proceeds from Crime through Non-State Pension Funds

2018 ◽  
Vol 3 (2) ◽  
pp. 293
Author(s):  
V.I. Tikhon
Keyword(s):  
Internal Control ◽  
Social Life ◽  
Pension System ◽  
Pension Funds ◽  
Pension Insurance ◽  
Economic Relations ◽  
System A ◽  
The Individual ◽  
State Pension ◽  
State Pension Funds

The crisis in the field of social security of the population occurred in the process of transformation of economic relations, and, first of all, in the pension system. A reform of the pension system has been implementing for a sufficient period of time, in order to overcome the negative phenomena. Non-state pension funds (further NPFs) have been severely criticized by the Ministry of Health and Social Development to address the mandatory pension insurance system. Private organizations ineffectively manage the pension savings of citizens, and there is also a place for - the legalization of criminal proceeds, the ministry believes, which can be confirmed by the data published by the Bank of Russia on the revocation of licenses from a number of NPFs[1].The legalization of criminal proceeds is by itself a very negative phenomenon, which adversely affects the individual organization, the economy as a whole and social life, exerting a detrimental effect on the economic and national security of society and the state. Operations, to some extent related to the legalization of criminal proceeds, significantly increase the risk of loss of reputation for non-state pension funds. As a result, these monetary resources fall into the global financial system, and acquire the ability to undermine the national currency and the economies of individual countries, thus creating a threat to both national and international security. Keywords: Legalization of criminal proceeds, private pension funds, risk-oriented approach, internal control.

scholarly journals Closing the gender gap in pensions: A microsimulation analysis of the Norwegian NDC pension system

2018 ◽  
Vol 29 (1) ◽  
pp. 130-143 ◽  
Author(s):  
Elin Halvorsen ◽  
Axel West Pedersen
Keyword(s):  
Gender Gap ◽  
Economies Of Scale ◽  
Pension System ◽  
Personal Income ◽  
Defined Contribution ◽  
Pension Income ◽  
System A ◽  
Actuarial Fairness ◽  
Annual Earnings ◽  
Pension Benefits

In this article, we use an advanced microsimulation model to study the distributional effects of the reformed Norwegian pension system with a particular focus on gender equality. The reformed Norwegian system is based on the notional defined contribution (NDC)-formula with fixed contribution/accrual rates over the active life-phase and with accumulated pension wealth being transformed into an annuity upon retirement. A number of redistributive components are built into the system: a unisex annuity divisor, a ceiling on annual earnings, generous child credits, a possibility for widows/widowers to inherit pension rights from a deceased spouse, a targeted guarantee pensions with higher benefit rates to single pensioners compared to married/cohabitating pensioners, and finally a tax system that is particularly progressive in its treatment of pensioners and pension income. Taking complete actuarial fairness as the point of departure, we conduct a stepwise analysis to investigate how these different components of the National Insurance pension system impact on the gender gap in pensions and on general (Gini) inequality in the distribution of pension income within a cohort of pensioners. Our analysis concentrates on one birth cohort – individuals born in 1963 – and we study three different outcomes: the distribution of annual pensions early in retirement (at age 70), the distribution of the total sum of pension benefits received over retirement, and the distribution of the average annual pension benefits received over the retirement phase. In addition, we look at three alternative income concepts. These are personal income, equivalised household income, and finally an original income concept developed for this study: personal income adjusted for the economies of scale enjoyed by couple households.

Die Auswirkungen des gesetzlichen Mindestlohns auf die Rentenentwicklung

2021 ◽  
Vol 70 (99) ◽  
pp. 1-19
Author(s):  
Oliver Ehrentraut ◽  
Philipp Kreuzer ◽  
Stefan Moog ◽  
Heidrun Weinelt ◽  
Oliver Bruttel
Keyword(s):  
Minimum Wage ◽  
Pension System ◽  
Full Time ◽  
Pension Insurance ◽  
Individual Level ◽  
Wage Effects ◽  
The Individual ◽  
Wage Increases ◽  
Full Time Employment ◽  
Pension Insurance System

Der Beitrag untersucht auf Basis eines Simulationsmodells und empirischer Daten die Auswirkungen des gesetzlichen Mindestlohns auf die Rentenversicherung. Dabei werden sowohl die Wirkungen auf das Rentensystem insgesamt als auch die individuellen Rentenansprüche von Beschäftigten analysiert. Auf das Rentensystem insgesamt hat der Mindestlohn praktisch keine Auswirkungen, weil der Impuls des Mindestlohns auf die gesamtwirtschaftliche Lohnsumme letztlich zu gering ist. Auf individueller Ebene können sich die Rentenanwartschaften der Versicherten je nachdem, wie deutlich ihr Verdienst aufgrund der Mindestlohneinführung gestiegen ist, erhöhen. Die Rentenanwartschaften bleiben aber bei einem Verdienst in Höhe des Mindestlohns selbst bei durchgängiger Vollzeitbeschäftigung unter dem Niveau der Grundsicherung im Alter. Abstract: The Effects of Minimum Wage on the Statutory Pension Insurance in Germany In 2015, Germany introduced a national minimum wage. Based on a simulation model and empirical data we analyse its effects on the statutory pension insurance. We will consider aggregate effects on the pension insurance system in total as well as on individual pension entitlements of employees. Our results show that the minimum wage has only negligible effects on the pension system as a whole because the minimum wage induced wage effects on the economy’s total wage bill are rather small. On the individual level, the minimum wage can help to increase individual pension entitlements. The magnitude depends on individual wage increases resulting from the minimum wage introduction. However, even continuous full-time employment at the minimum wage level will not be enough to lift individual pension entitlements above the guaranteed minimum pension level.

Individual Factors Affecting the Participation of Turkish People in the New Individual Pension System

2021 ◽  
pp. 98-110
Author(s):  
Emine Ebru Aksoy
Keyword(s):  
Pension System ◽  
Survey Study ◽  
Individual Factors ◽  
Limited Participation ◽  
Factors Affecting ◽  
System A ◽  
Opt Out ◽  
Turkish People ◽  
And Gender ◽  
The Individual

In Turkey, the first step of the individual pension system was based on volunteerism, but the voluntary system resulted in limited participation. Thus, the second step of the system has started to be implemented mandatorily since 2017, and participants were allowed to opt-out the system within two months. More than half of participants in the system preferred to leave the system. Therefore, this study aims to examine individual factors affecting their decision of staying in this system. A survey study was conducted with 374 people selected using the random sampling method. As a result of the study, a positive relationship was found only between the dependent variable and gender, but a significant relationship was determined only between the dependent variable and education level. Based on the results of this study, it is suggested that if the system will need to be improved, the low-performing fund management of the new individual pension system should be re-audited, and the confidence in the system should be increased in this way.

scholarly journals Contribution volatility and public pension reform

2017 ◽  
Vol 17 (4) ◽  
pp. 513-533 ◽  
Author(s):  
TRAVIS ST. CLAIR ◽  
JUAN PABLO MARTINEZ GUZMAN
Keyword(s):  
Local Governments ◽  
Pension System ◽  
Pension Reform ◽  
Pension Plans ◽  
Fiscal Sustainability ◽  
Economic Downturn ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Unfunded Liabilities

AbstractIn the wake of the economic downturn of 2008–2009, researchers and policymakers have focused considerable attention on the extent of unfunded liabilities in US public sector pension plans and the implications for the long term fiscal sustainability of state and local governments. In response to the growth in liabilities, many states have introduced legislation that cuts back on defined benefit (DB) plan commitments, in some cases even shifting the pension system from a DB to a defined contribution or hybrid plan. This paper explores the factors that have led states to engage in pension reform, focusing particular attention on one factor that has only recently gained attention in the research literature: contribution volatility. While unfunded liabilities have significant long-term solvency implications, in the short term fluctuations in the amount of required contributions pose substantial difficulties for the ability of plan sponsors to balance budgets and engage in strategic planning. We begin by quantifying the volatility in the required contributions US states were expected to make between 2001 and 2013 and comparing the volatility of pension spending to other relevant tax and spending measures. Next, we describe the various types of pension reforms that states have implemented and examine the fiscal pressures facing those states that have engaged in reform. States with greater fluctuations in their required payments have been more likely to reduce benefits and increase employee contributions; they have also been more likely to institute these reforms sooner.

The effects of risk aversion and density of contribution on comparisons of administrative charges in individual account pension systems

2016 ◽  
Vol 16 (1) ◽  
pp. 1-20 ◽  
Author(s):  
LUIS CHAVEZ-BEDOYA
Keyword(s):  
Risk Aversion ◽  
Pension System ◽  
Pension Plan ◽  
Defined Contribution ◽  
Individual Retirement Accounts ◽  
Terminal Wealth ◽  
Individual Account ◽  
Retirement Accounts ◽  
Defined Contribution Pension Plan ◽  
Accumulation Phase

AbstractThis paper studies the effects of risk aversion and density of contribution (DoC) on comparisons of proportional charges on flow (contributions) and balance (assets) during the accumulation phase of a defined-contribution pension plan in a system of individual retirement accounts. If the participant's degree of risk aversion increases and both charges yield the same expected terminal wealth, then the charge on balance improves with respect to the charge on flow when performing comparisons that examine the ratio between the resulting expected utilities of terminal wealth. When this methodology is applied to the Peruvian Private Pension System, empirical results demonstrate that the aforementioned result also holds for arbitrary charges on flow and balance and that the effect of DoC on these comparisons is nearly negligible for most of the assessed scenarios.

scholarly journals A model for the pension system in Mexico: diagnosis and recommendations

2014 ◽  
Vol 14 (1) ◽  
pp. 76-112 ◽  
Author(s):  
JAVIER ALONSO ◽  
CARMEN HOYO ◽  
DAVID TUESTA
Keyword(s):  
Pension System ◽  
High Rate ◽  
Economic Forecast ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Projection Model ◽  
Employment History ◽  
Coverage Rates ◽  
Low Coverage

AbstractThe reform of the pension system of the Mexican Social Security Institute (IMSS) in 1997, limited the growing fiscal cost of the previous pay-as-you-go scheme. Sixteen years on from its creation, the Retirement Savings System (SAR) has had favourable macroeconomic effects for Mexico, as it has significantly increased financial savings and encouraged the development of local financial markets.However, the employment and pension coverage has not developed as hoped, due to the high rate of informality in the labour market. In addition, the replacement rates (RR) forecast for old-age pensions from the defined-contribution scheme will be low, due to problems exogenous to the pension system, such as low contribution rates and low contribution densities. The main objective of this study is to develop a macroeconomic and actuarial projection model to simulate the expected coverage and RR for the period 2012–2050, within the framework of a demographic and economic forecast that will allow a detailed diagnosis of the current conditions of the pension system. The results reveal the unpromising scenario that the pension system has and will continue to have in the long term, with limited improvements in coverage rates. The possibility of obtaining adequate pensions will be restricted to those who have socioeconomic conditions with a long employment history, who can thus make contributions to their individual accounts.Taking into account this baseline projection scenario, we simulate the expected effects of applying a set of proposals with the aim of tackling the main problems, such as the low coverage, low RR, and low level of participation by young people in the system.

Individual Account Pension Actuarial Model under Fixed Interest Rates

2014 ◽  
Vol 556-562 ◽  
pp. 6556-6560
Author(s):  
Nian Nian Jia ◽  
Xue Zhao ◽  
Liu Yang
Keyword(s):  
Interest Rates ◽  
Pension System ◽  
Population Aging ◽  
Joint Modeling ◽  
Standard Wiener Process ◽  
Pension Insurance ◽  
Individual Account ◽  
Personal Accounts ◽  
The Impact ◽  
Actuarial Model

In the context of the global population aging, pension issue has become highly important and pressing national concerns. Therefore, to further improve and perfect pension system, especially for the pension insurance system, has a very important social value. From the following aspects of old-age insurance personal accounts actuarial model: The first, deduced fixed interest rate, monthly payment of personal accounts pension actuarial model; the second, taking into account the impact of different factors on interest rates, constructed in the form of joint modeling standard Wiener process and Poisson process personal accounts pension actuarial model formula is derived.

scholarly journals REFORMS OF FINANCING PENSION INSURANCE SYSTEM IN CONDITIONS OF TRANSITION

2017 ◽  
Vol 1 (12) ◽  
pp. 51
Author(s):  
Aleksandar Stojanović
Keyword(s):  
Old Age ◽  
Pension System ◽  
Pension Reform ◽  
Current System ◽  
Intergenerational Solidarity ◽  
Pension Insurance ◽  
Current State ◽  
The Social ◽  
Pension Insurance System

A serious crisis of the pension system has been present in Bosnia and Herzegovina, as well as in many other countries for many years. The current system, which functions on the concept of intergenerational solidarity is financially unsustainable, due to negative demographic and economic movements, as well as reduced number of the employed, and an increase in the number of pensioners. As the main objective of the pension system (the social security of citizens, ie protection against the risk of old age, disability and death) is not fulfilled, it seems that the reform of the pension system is necessary. It is necessary to answer the question: how to transform the pension system of intergenerational solidarity in a system of individual capitalized savings in a socially painless and affordable way?! The implementation of the pension reform aims to establish a long-term sustainable pension system that will provide quality protection from risk, old age, death, disability, and at the same time be consentaneous with economic and demographic movements andensure an adequate level of benefit to citizens in the later age.The aim of the paper is to define the wider, objective picture of the current state of the position of the pension system, as well as providing basic guidelines for the reform and development courses in the future.

scholarly journals Theoretical classification of corporate stocks and bonds on the current international capital market

2005 ◽  
Vol 53 (3) ◽  
pp. 171-184
Author(s):  
Oldřich Rejnuš
Keyword(s):  
Financial Markets ◽  
Capital Market ◽  
International Capital ◽  
Common Stocks ◽  
Characteristic Features ◽  
The Individual ◽  
The Given ◽  
Legal Identification

The article deals with the theoretical classification of “classic” capital market securities, i.e. corporate stocks and bonds. Its aim was to make a detailed analysis of the individual types of these securities from the viewpoint of their main characteristic features, and to look for possible ways of systemizing them and distinguishing them as unambiguously as possible. As the aim of this analysis was to identify the most important and typical properties of not only corporate stocks and long-term bonds that are commonplace in investing but also of those that are rare on financial markets, the analysis was made from a global viewpoint, i.e. without regard to the individual countries’ legislative conditions.The analysis focused, above all, on looking for ways to construct the individual types of stocks and bonds and of the most important rights connected with them. Using the obtained results, these types were mutually compared and possible ways of their systemization were explored. Taking into account these facts, certain significant properties (which, however, concern all securities in general, such as “issuer type” or conditions of transferability/ways of tradeability) were intentionally abstracted.The result of the analysis confirms the meaningfulness of certain existing theories concerning the existence of three relatively different groups of “classic” securities: common stocks, preferred stocks, and bonds. At the same time, the analysis has shown that as far as this classification is concerned, it is based mainly on the function of the securities, which means that the properties regarding their structure and legal content are covered only partially. This is also proved by making a proposal for a comprehensive systemization, which shows that on the current financial market there are many situations when (except the legal identification) it is difficult to judge from the particular properties of a security whether it is a bond or a stock, or (in the latter case) which type of stock it is. For the above-mentioned reason, the conclusion stresses the necessity to create at least partly harmonised international legislation in the given area, and presents recommendations for the establishment of the fundamental part of a harmonised system of legislation, which increasingly appears to be essential.

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