COVID-19 The Global Pandemic: Learning & Take Out for National Pension System (NPS)

2021 ◽  
Vol 4 (i) ◽  
Keyword(s):  
New York ◽  
Pension Fund ◽  
Pension System ◽  
Stock Exchange ◽  
Stock Exchanges ◽  
Security Market ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Economic Activities ◽  
Fund Managers

The SARS Cov-2 (Covid 19) pandemic has shaken the whole world; it has brought the business, education, industry, transport, communications, travel, hospitality almost all the economic activities to a standstill. Accordingly, it has adversely affected the financial markets and stock exchanges across the globe. The stock exchanges, may it be New York Stock Exchange, Dow Jones, London Stock Exchange, Nikkei, Bombay Stock Exchange or National Stock Exchange experienced an unprecedented plunge of 40 to 50% in a period few weeks. This new dynamic of volatility possesses serious questions about the market driven National Pension System (NPS) which endeavor to ensure smooth retirement life for Indian elderly. The volatility in security market will significantly impact the fund managers’ performance and accordingly the retirement benefit of the subscriber. This article has investigated the impacts of pandemic on fund manager’s risk returns profile. We have used three industry standard risk-adjusted returns parameters such as Sharpe ratio, Treynor Ratio and Jensen’s alpha to evaluate the performance of NPS pension fund managers selected under study. The study has also explored the learning from such unexpected crisis for the policy makers for future preparedness. On the basis of finding, it has suggested some measures for long run sustainability of schemes under NPS. Keywords : NPS, PFRDA, Defined benefit, Defined contribution, Pension fund managers, Risk adjusted returns, COVID-19.

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.

Corporate governance, accounting transparency and stock exchange sizes in Germany, Japan and «Anglo-Saxon» economies, 1870–1950

2019 ◽  
Vol 64 (2) ◽  
pp. 157-186
Author(s):  
Leslie Hannah
Keyword(s):  
New York ◽  
Corporate Governance ◽  
Stock Exchange ◽  
Civil Law ◽  
Corporate Bond ◽  
Stock Exchanges ◽  
Anglo Saxon ◽  
Legal Rules ◽  
Legal Origins ◽  
The Us

AbstractModern discussions of corporate governance have focused on convergence of «varieties of capitalism», particularly the recent «Americanisation» of laws and voluntary codes in Germany, Japan, and other civil law countries. However German and Japanese legal and business historians have suggested that corporate governance, accounting transparency or other favourable factors in their countries were historically a match for – or even superior to – those in the US. An alleged consequence was deeper penetration by the Berlin and Tokyo stock exchanges of their domestic economies than of the US by the New York Stock Exchange (NYSE), using measures such as market capitalization/GDP ratios. This paper reviews the classic Rajan and Zingales data on the sizes of stock exchanges. It concludes that the evidence for Japanese historical precocity relative to the US, after the necessary allowance is made for regional stock exchanges and corporate bond finance, stands up better to this closer examination than that for Germany.Many financial historians now agree that stock exchange development was not historically determined by legal origins («Anglo-Saxon» common vs Euro-Japanese civil law), though today it appears to be driven by legal rules protecting shareholders and/or bondholders and limiting directorial autocracy and information asymmetry. However, both today and historically in some cultures private order rules (voluntary codes, bourse listing requirements, bankers as trusted intermediaries, block-holder monitoring, etc) offered substitute protections, or at least complemented protective laws. This paper reviews the plausibility of these determinants of historical stock exchange sizes – and others that have been neglected – in Japan, Germany, and elsewhere, before 1950.

Minimum funding ratios for defined-benefit pension funds

2010 ◽  
Vol 10 (3) ◽  
pp. 417-434 ◽  
Author(s):  
ARJEN SIEGMANN
Keyword(s):  
Risk Aversion ◽  
Expected Utility ◽  
Pension Fund ◽  
Equity Premium ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Intergenerational Solidarity ◽  
Defined Contribution ◽  
Power Utility ◽  
Time Diversification

AbstractWe compute minimum nominal funding ratios for defined-benefit (DB) plans based on the expected utility that can be achieved in a defined-contribution (DC) pension scheme. Using Monte Carlo simulation, expected utility is computed for three different specifications of utility: power utility, mean-shortfall, and mean-downside deviation. Depending on risk aversion and the level of sophistication assumed for the DC scheme, minimum acceptable funding ratios are between 0.87 and 1.20 in nominal terms. For relative risk aversion of 5 and a DC scheme with a fixed-contribution setup, the minimum nominal funding ratio is between 0.87 and 0.98. The attractiveness of the DB plan increases with the expected equity premium and the fraction invested in stocks. We conclude that the expected value of intergenerational solidarity, providing time-diversification to its participants, can be large. Minimum funding ratios in real (inflation-adjusted) terms lie between 0.56 and 0.79. Given a DB pension fund with a funding ratio of 1.30, a participant in a DC plan has to pay a 2.7 to 6.1% point higher contribution on average to achieve equal expected utility.

scholarly journals Informality and the Challenge of Pension Adequacy

2019 ◽  
Vol 19 (149) ◽  
pp. 1
Author(s):  
Christoph Freudenberg ◽  
Frederik Toscani
Keyword(s):  
Pension System ◽  
Pension Reform ◽  
Positive Impact ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Real Rate ◽  
Labor Market Reform ◽  
The Impact ◽  
Term Labor ◽  
Pension Adequacy

Past reforms have put the Peruvian pension system on a largely fiscally sustainable path, but the system faces important challenges in providing adequate pension levels for a large share of the population. Using administrative microdata at the affiliate level, we project replacement rates in the defined benefit (DB) and defined contribution (DC) pillars over the next 30 years and simulate the impact of various reform scenarios on the average level and distribution of pensions. In the DB pillar, the regressive minimum contribution period should be re-thought, while in the DC pillar a broadening of the contribution base and/or an increase in contribution rates would help increase replacement rates relative to the baseline forecast of 25-33 percent. A higher net real rate of return than assumed in the baseline would also have a significant positive impact. In the medium-term, labor market reform to tackle informality, and a broad pension reform to restructure the system and avoid competition between the DB and DC pillars should be a priority. Given low pension coverage, having a strong non-contributory pillar will remain important for the foreseeable future.

scholarly journals Financial Actuarial Assumptions: Empirical Study of How Brazilian Companies Manage Their Defined Benefit Plans

2020 ◽  
Vol 14 ◽  
pp. 61-77
Author(s):  
João Evangelista de Souza Neto ◽  
Fernando Caio Galdi
Keyword(s):  
Growth Rate ◽  
Empirical Study ◽  
Pension Fund ◽  
Stock Exchange ◽  
Political Connections ◽  
Defined Benefit ◽  
Return On Assets ◽  
Expected Return ◽  
Defined Benefit Plans

This study investigates the factors that Brazilian companies use to manage their defined benefit plans, specifically the determinants of the three financial actuarial assumptions: discount rate, expected return on assets and compensation growth rate. The focus of this research is the companies listed on the B3 – Brazilian Stock Exchange - that recognized and disclosed, from 2010 to 2017, post-employment benefit characterized as Defined Benefit (DB). The sample containing 296 firm/year was divided into two subgroups considering the firm’s political connections. The results suggest that politically connected companies are less effective in managing the solvency of funds or, according to Kido, Petacchi and Weber (2012) act intentionally to justify the company's financial stress. The year before the elections proved to be the most relevant period of discretion, while the specific year of the electoral election only influences the determination of the actuarial financial premises in politically connected companies and, just like in Naughton, Petacchi and Weber (2015) the manager acts to improve the solvency (reduce the deficit) of the pension fund in these periods. The hypothesis that politically connected companies have an incremental adjustment in actuarial assumptions in electoral years has shown results consistent with the theory suggesting that this group of companies manages the reduction of the actuarial deficit in election times more incisively

scholarly journals Pension and Active Ageing: Lessons Learned from Civil Servants in Indonesia

2021 ◽  
Vol 10 (11) ◽  
pp. 436
Author(s):  
Aris Ananta ◽  
Ahmad Irsan A. Moeis ◽  
Hendro Try Widianto ◽  
Heri Yulianto ◽  
Evi Nurvidya Arifin
Keyword(s):  
Old Age ◽  
Pension System ◽  
Simulation Method ◽  
Lessons Learned ◽  
Civil Servants ◽  
Active Ageing ◽  
Ageing Population ◽  
Defined Benefit ◽  
Defined Contribution ◽  
State Budget

Many developing countries are currently facing an ageing population without sufficient preparation for old-age financial adequacy, an important component in active ageing. One question is whether a pension system can create old-age financial adequacy. At the same time, many countries are shifting their pension systems from a defined benefit to a defined contribution pension system to improve the welfare of older people while maintaining state budget sustainability. Indonesia is not an exception. This paper learns from civil servants in Indonesia, where the retirement payout from the existing pay-as-you-go, defined benefit system is meagre. The system is to be transformed into a defined contribution one. Using a simulation method, this paper examines whether the proposed system will provide a better retirement payout, which is higher than the minimum wage and will allow retirees to maintain their pre-retirement income. This paper concludes that the proposed system alone is not sufficient to create old-age financial adequacy and, therefore, is less able to contribute to active ageing. To improve the retirement payout, among other things, the retirement age should be raised and made optional, and the accumulated savings should be re-invested during the retirement period.

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 South African pension fund conversions: Dealing with environmental change

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
D. T. George ◽  
R. J.O. Joubert
Keyword(s):  
Environmental Change ◽  
South African ◽  
Pension Fund ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Structured Interviews ◽  
Value Analysis ◽  
Stakeholder Interests ◽  
Environmental Shock ◽  
Organisational Behaviour

Purpose: The purpose of this paper is to analyse South African pension fund conversions from defined benefit to defined contribution structures and to develop a model for dealing with environmental change. Design/Methodology/Approach: Qualitative research methodology was used. Industry experts were interviewed to obtain a macro view of the phenomenon and specific manifestations of the phenomenon were also considered in case studies.Feedback from semi-structured interviews was categorised into several emergent themes. Within-case and cross-case analyses were conducted. Findings: Results indicated that an environmental shock exerted a substantial influence on the course of events. Under these: Various factors combined to drive organisational evolution (i.e. adaptation to the environment). Adaptation speed was inappropriate and exceeded that which was required for sufficient thought. Uncertainty and vacuum circumstances arose leading to consequences that require redress. The relative power of the stakeholders changed and influenced the strategic outcome. An imbalance in stakeholder interests arose and ethical factors became consequential. Business acted to restore certainty for itself.Implications: This paper provides insight into organisational behaviour during periods of environmental shock. Environmental shock can be defined as "a condition that arises where business or societal rules are inadequate, or do not exist, to deal with unfolding events". An environmental shock has greater magnitude than a competitive shock, and can include several competitive shocks.Originality/Value: Analysis of pension fund conversions revealed organisational behaviour during periods of environmental shock and the emerging model can be applied in other instances of environmental shock, such as broad-based black economic empowerment (B-B BEE), land redistribution, sanctions and constitutional development.

scholarly journals The problematic nature of UK pension fund regulation: Performing governance at the expense of innovation

2020 ◽  
pp. 102452942097460
Author(s):  
Gordon L. Clark
Keyword(s):  
Financial Services ◽  
Pension Fund ◽  
Best Interests ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Dead End ◽  
Fit For Purpose ◽  
Board Decision Making ◽  
The Uk ◽  
Pension Adequacy

At the heart of UK pension fund regulation are quasi-compulsory codes of practices and tests of pension fund trustees’ competence. This regime of ‘soft’ regulation focuses upon the ‘performance’ of governance and is intrusive in terms of expected behaviour and board decision-making. Framed by defined benefit pension obligations in the private sector, it lacks rigorous standards of value when applied to defined contribution pensions. As such, pension ‘adequacy’ is discounted by the premium placed on performing governance in the market for financial services. The UK pension regime has hit a dead-end being neither fit-for-purpose in a world of technological disruption and financial turmoil nor capable of empowering those funds willing and able to innovate in the best interests of participants.

Sign in / Sign up

Export Citation Format

Share Document