Individual Pension Products Offered by Banks in Poland - a Multidimensional Comparative Analysis

The supplementary old-age pension system in Poland consists of group and individual plans. This research covers the latter, namely the individual retirement accounts and individual retirement security accounts that were introduced in 2004 and 2012 respectively. The main aim of the paper is to conduct a multidimensional comparative analysis of bank retirement products including the linguistic complexity of documents creating the retirement contracts offered to individuals by banks, and the costliness and profitability of such products in the period 2012-2019. Moreover, it identifies the dependencies between the linguistic and economic traits of retirement contracts offered by banks. The correlation analysis conducted using the Spearman’s rank correlation coefficient showed that the more readable a document of a bank contract is, the higher the interest rate is and the higher the cancellation fees. The results of the study are relevant for both financial institutions and public bodies as they show the key characteristics that may influence the demand for individual retirement products in Poland and may serve as either a stimulator or a barrier in the development of supplementary old-age pension provision.

Race, Ethnicity, and Retirement Security in the United States

U.S. workers need to save substantial amounts to supplement Social Security, a near-universal but basic public retirement benefit. Yet wealth inequality is widespread by race and ethnicity, so that households of color often have less wealth than White households. This wealth inequality is reflected in a massive retirement savings gap by race and ethnicity, so that households of color often have less wealth than White households. In 2016 Black households had a median retirement savings account balance of $23,000, compared to $67,000 for White households. Many people of color will face substantial and potentially harmful cuts to their retirement spending. They may, for example, find it more difficult to pay for housing or healthcare. This retirement gap is the result of several factors. Households of color, especially Black and Latino households, are less likely to receive large financial gifts and inheritances from their families. They have less wealth decades and often centuries of discrimination and exploitation in society. They thus have to save more for retirement on their own. Yet Black, Latino, and many Asian American workers face greater obstacles in saving for retirement than is the case for White workers. These obstacles are especially pronounced in retirement savings accounts. People of color have less access to these retirement benefits through their employers, contribute less due to greater concurrent economic risks, and build less wealth over time due to less stable earnings and more career disruptions. As a result, people of color often use home equity as a form of retirement savings, but they also face more financial risks associated with homeownership. In addition, many people of color face higher costs during retirement, especially higher healthcare costs and more widespread caregiving and financial responsibilities for family members. The coronavirus pandemic has exacerbated many of the obstacles and risks associated with retirement saving for people of color, who experienced sharper increases in unemployment and more widespread healthcare challenges due to greater exposure to the virus. Many Black, Latino, and Asian families had to rely more heavily on their own savings during the pandemic than was the case for White households. A range of public policies have been proposed or implemented, especially at the state level, to address some of the obstacles that people of color face in saving for retirement. Retirement researchers will need to investigate whether and how the pandemic has affected racial differences in retirement security as well as analyze how new policy efforts could shrink the racial differences in retirement wealth.

Premium Valuation of the Pension Benefit Guaranty Corporation with Regime Switching

The Pension Benefit Guaranty Corporation (PBGC) provides insurance coverage for single-employer and multiemployer pension plans in private sector. It has played an important role in protecting the retirement security for over 1.5 million people since it was established about half a decade ago. PBGC collects insurance premiums from employers that sponsor insured pension plans for its coverage and receives funds from pension plans that it takes over. To address the issue of underfunded plans that the PBGC has, this work studies how to evaluate risk-based premiums for the PBGC. Inspired by a couple of existing work in which the premature termination of pension fund and distress termination of sponsor assets are analyzed separately, our work examines the two types of terminations under one framework and considers the occurrence of each termination dynamically. Given that market regime might have a big impact on the dynamics of both pension fund and sponsor’s assets, we thus formulate our model using a continuous-time two-state Markov chain in which bull market and bear market are delineated. We thus formulate our model using a continuous-time two-state Markov Chain in which bull market and bear market are delineated. In other words, the pension fund and sponsor assets are market dependent in our work. Given that this additional uncertainty described by regime switching makes the market incomplete, we therefore utilize the Esscher transform to determine an equivalent martingale measure and apply the risk neutral pricing method to obtain the closed-form expressions for premium of PBGC. In addition, we carry out numerical analysis to demonstrate our results and observe that premium increases according to the retirement benefit irrespective of the type of terminations. In comparison to the case of early distress termination of sponsor assets, the premium goes up more quickly when premature termination of pension funds occurs first due to the fact that pension fund is the first venue of retirement security. Furthermore, we look at how the premium changes with respect to other key parameters as well and make some detailed observations in the section of numerical analysis.