Automatic Balance Mechanisms in Pay-as-You-Go Pension Systems

Vidal‐Meliá, Carlos; Boado‐Penas, María del Carmen; Settergren, Ole

doi:10.2139/ssrn.1132686

Cited by 26 publications

(27 citation statements)

References 36 publications

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“…Vidal‐Meliá, Boado‐Penas and Settergren () show the convenience of an automatic balance mechanism in the pension system. After analyzing the experiences in five countries (Sweden, Canada, Germany, Japan and Finland), they suggest the use of an actuarial solvency indicator, the solvency ratio (total assets/liabilities) as a reference to implement an automatic balance mechanism.…”

Section: Overview Of Automatic Mechanisms In Pension Systemsmentioning

confidence: 99%

Adjustment mechanisms and intergenerational actuarial neutrality in pension reforms

Gaya

Devesa

et al. 2016

Int Social Security Review

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In the context of the reform of defined benefit pension systems under population ageing, we focus on the introduction of automatic adjustment mechanisms linked to life expectancy. Our goal is to establish a relationship between changes in the key parameters of the pension system and changes in life expectancy, applying the principle of intergenerational actuarial neutrality. For a defined benefit pension scheme, we first obtain the fundamental adjustment equation and then, for particular cases, we derive different designs of automatic adjustment mechanisms depending on the involved parameter. We include a numerical application only for illustrative purposes.

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Section: Overview Of Automatic Mechanisms In Pension Systemsmentioning

confidence: 99%

Adjustment mechanisms and intergenerational actuarial neutrality in pension reforms

Gaya

Devesa

et al. 2016

Int Social Security Review

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“…Barr (2010) also gives sound reasons for extending social security to provide mandatory cover for LTC. Auerbach and Lee (2009), Vidal-Meliá, Boado-Penas, and Settergren (2009, Whitehouse (2010), Lee (2011), Chłoń-Domińczak, Franco, andPalmer (2012), Boado-Penas and Vidal-Meliá (2012) and Holzmann, Palmer, and Robalino (2012). 3.…”

Section: Concluding Comments and Directions For Future Researchmentioning

confidence: 99%

Notional defined contribution pension schemes: why does only Sweden distribute the survivor dividend?

Vidal‐Meliá

Boado‐Penas

Navarro-Cabo³

2015

Journal of Economic Policy Reform

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The aim of this paper is to analyse the role of the survivor dividend in notional defined contribution (NDC) pension schemes. At present, this feature can only be found in the Swedish defined contribution scheme. We develop a model that endorses the idea that the survivor dividend has a strong basis for enabling the NDC scheme to achieve financial equilibrium and that not including the dividend is a non-transparent way of compensating for increases in longevity and/or legacy costs from old pension systems. We also find that the average effect of the dividend remains unchanged for any constant annual rate of population growth, that contributors who reach retirement age always get a higher return than the scheme does, and that population growth enables cohorts with more years of contributions to benefit to a greater extent from the dividend effect.

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“…The most suitable option for an already-functioning NDC scheme would be to use an estimated value of G based on the most recently observed data (the previous three or five years), which is in keeping with the principle that assets and liabilities are valued mainly on the basis of events and transactions that are verifiable at the time of valuation. In practice, the introduction of this item would increase the volatility of the system's results and could trigger (unnecessarily) the automatic balance mechanism (ABM), which is a set of predetermined measures established by law to be applied immediately as required according to an indicator that reflects the system's financial health [89][90][91]. Börsch-Supan [92] called these ABMs rational mechanisms and points out that they are transparent because it is clear how adjustments will be made and who will bear what costs when an adjustment occurs.…”

Section: The Income Statement: Exploring the Reasons For The Change Imentioning

confidence: 99%

Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

2018

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This paper develops a social insurance accounting model for a notional defined contribution (NDC) scheme combining retirement and long-term care (LTC) contingencies. The procedure relies on standard double-entry bookkeeping and enables us to compile a "Swedish" type actuarial balance sheet (ABS) following a framework equivalent to an open group approach. This methodology is suitable for reporting the system's solvency status and can show periodical changes in the system's financial position by means of an income statement. The information underpinning the actuarial valuation is based on events and transactions that are verifiable at the valuation date, without considering expected future trends. The paper also contains an illustrative example to make it easier for policymakers to understand the main advantages and difficulties of our proposal. The policy conclusions stress the need to properly report social insurance benefits to enhance transparency and sustainability and to improve decision-making because it is in the public interest to do so.

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Automatic Balance Mechanisms in Pay-as-You-Go Pension Systems

Cited by 26 publications

References 36 publications

Adjustment mechanisms and intergenerational actuarial neutrality in pension reforms

Adjustment mechanisms and intergenerational actuarial neutrality in pension reforms

Notional defined contribution pension schemes: why does only Sweden distribute the survivor dividend?

Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

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