Determining the Pension Benefit Obligation of a Defined Benefit Plan: Applying a Multivariate ARIMA Stochastic Model

<p>In this study we examine the robustness of fit for a multivariate and an autoregressive integrated moving average model to a data sample time series type. The sample is a recurrent actuarial data set for a 10-year horizon. We utilize this methodology to contrast with stochastic models to make projections beyond the data horizon. Our key results suggest that both types of models are useful for making predictions of actuarial liability levels given by PBO Projected Benefit Obligations on and off the horizon of the sample time series. As we have seen in prior research, the use of multivariate models for control and auditing purposes is widely recommended. Fast and reliable statistical estimates are desirable in all cases, whether for audit purposes or to verify and validate miscellaneous actuarial results.</p>

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

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.

Supporting strategic health purchasing: a case study of annual health budgets from general tax revenue and social health insurance in Abia state, Nigeria

Background Tracking general trends in strategic purchasing of health financing mechanisms will highlight where country demands may exist for technical support and where progress in being made that offer opportunities for regional learning. Health services in Abia State, Nigeria are funded from general tax-revenues (GTR), and a new state social health insurance scheme (SSHIS) is proposed to overcome the failings of the GTR and expand coverage of services. This study examined purchasing functions within the GTR and the proposed SSHIS to determine if the failings in GTR have been overcome, identify factors that shape health purchasing at sub-national levels, and provide lessons for other states in Nigeria pursuing a similar intervention. Methods Data was collected through document review and key informant interviews. Government documents were retrieved electronically from the websites of different organizations. Hard copies of paper-only files were retrieved from relevant government agencies and departments. Interviews were conducted with seven key personnel of the State Ministry of Health and State Health Insurance Agency. Thematic analysis of data was based on a strategic health purchasing progress tracking framework which delves into the governance arrangements and information architecture needed for purchasing to work well; and the core purchasing decisions of what to buy; who to buy from; and how to buy. Results There are differences in the purchasing arrangements of the two schemes. Purchaser-provider split does not exist for the GTR, unlike in the proposed SSHIS. There are no data systems for monitoring provider performance in the GTR-funded system, unlike in the SSHIS. Whereas GTR is based on a historical budgeting system, the SSHIS proposes to use a defined benefit package, which ensures value-for-money, as the basis for resource allocation. The GTR lacks private sector engagement, provider accreditation and contracting arrangements while the SSHIS will accredit and engage private providers through selective contracting. Likewise, provider payment is not linked to performance or adherence to established standards in the GTR, whereas provider payment will be linked to performance in the SSHIS. Conclusions The State Social Health Insurance has been designed to overcome many of the limitations of the budgetary allocation to health. This study provides insights into the enabling and constraining factors that can be used to develop interventions intended to strengthen the strategic health purchasing in the study area, and lessons for the other Nigeria states with similar characteristics and approaches.

Mortality by socio-economic class and its impact on the retirement schemes: how to render the systems fairer?

Many OECD countries have addressed the issue of increased longevity by mainly increasing the retirement age. However, this kind of reforms may lead to substantial transfers from those with shorter lifespans to those that will live longer than the average, as they do not necessarily take into account the socio-economic differences in mortality. The contribution of our paper is therefore twofold. Firstly, we illustrate how both a Defined Benefit and a Notional Defined Contribution pay-as-you-go scheme can put the lower social economic classes at a disadvantage, when compared to the actuarially fair pensions. In contrast to that, higher classes experience a gain. This is due to the fact that mortality rates per socio-economic class are not considered by either scheme. Consequently, we propose a model that determines the parameters for each scheme and class which would render the pensions fairer even when no socio-economic mortality differences are considered.

Sustaining the unsustainable? The political sustainability of pensions in Finland and the Netherlands

What makes a pension scheme sustainable? Most answers to this question have revolved around expert assessments of pension schemes’ affordability or adequacy. This study shifts focus from the financial or social sustainability of pension scheme designs to their political sustainability. Political sustainability refers to policymakers’ ability and willingness to sustain pension schemes in the face of perceived challenges. We seek to fill a key research gap concerning the political sustainability of pensions by highlighting the processes of parametric adjustment through which pension schemes are sustained. We show how capital, labour and state actors have been able to actively sustain collective defined benefit (DB) pension schemes in two coordinated market economies, Finland and the Netherlands. The two countries have managed to sustain their DB pensions for relatively long periods of time despite facing the same sustainability challenges that have motivated paradigmatic shifts in other pension systems. We find that sustaining has been successful thanks to a governance culture in which policymakers have been willing to keep all pension scheme parameters open for negotiation and an institutional context that made policymakers able to turn parametric pension reforms into power resources for further reforms. Our findings also explain recent changes in the Netherlands, which moved the Dutch system towards collective defined contribution pensions.

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

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.

Offsetting Risk in a Neoliberal Environment: The Link between Asset-Based Welfare and NIMBYism

Affordable housing policy in the developed world has been undergoing a systematic commodification for several decades, including a push for homeownership as the normalized tenure and a commodity unto itself. Scholars suggest this push for homeownership is part and parcel of a neoliberal asset-based welfare to supplement, or even outright replace, traditionally defined benefit pension schemes. These policies individualize risk and re-fashion individual citizens as long-term financial planners, navigating the uncertainty inherent in international financial markets and general financial management. Less deeply explored, however, are the perverse incentives this system creates for homeowners to protect their home “investment” by leveraging planning policies, zoning, and land-use restrictions to preserve the community status quo and lock in the value of their home. In a policy environment in which long-term financial risk is individualized and public social welfare and pension systems are relegated to the smallest number of individuals possible, this type of NIMBYism (Not in My Backyard) is rather rational behavior, even as it simultaneously staunches the supply of new housing and drives up prices for non-homeowners. As such, this analysis synthesizes the existing research to make a formal theoretical connection between the neoliberal push for commodified housing, asset-based welfare, and the intractable political problem of NIMBYism.