Redistributive Impact of Differential Mortality in the French Pay-As-You-Go System

Fairness and annuity divisors for notional defined contribution pension schemes

“…The measurement of lifetime redistribution from an individual's perspective can be investigated through the difference between an individual's lifetime contributions and lifetime retirement benefits in this way, we would capture the money's worth of participation in the pension system (Börsch-Supan and Reil-Held, 2001;Bonenkamp, 2009;Belloni and Maccheroni, 2013). However, we use a variant based on the principle of relative equivalence, called the benefit to cost ratio (or present value ratio) defined as the ratio between the present value of benefits paid during retirement and the contributions paid during their working career (Brown, 2002(Brown, , 2003Liebman, 2002;Borella and Coda Moscarola, 2006;Barnay, 2007;Mazzaferro et al, 2012;Belloni and Maccheroni, 2013). Thus, the ratio shows how much the benefit system returns to the participant for each Euro paid.…”

“…2 See the works on measuring distributional effects in the pension system, e.g., Cubeddu (2000), Börsch-Supan and Reil-Held (2001), Gustman and Steinmeier (2001), Coronado, Fullerton, and Glass (2002), Barnay (2007) the level of education can be used as a proxy for an individual's lifetime resources since people with higher levels of educational attainment earn, on average, higher incomes (Brown, 2003). The full life cycle is incorporated in the analysis, rather than annual effects, by using a particular indicator, namely the present value ratio that enables us to assess the expected money's worth of participation in the pension system.…”

Rich and healthy—better than poor and sick?

“…2 Redistribution induced by differential mortality could, however, be overcome by corresponding differences in the retirement age-see, e.g. Barnay (2007) with a study on France that highlights the potential benefit of induced retirement behavior to offset redistribution (Barnay, 2007, however, conditions the redistribution on different professions and educational levels instead of income). A further empirical contribution with regard to heterogeneous social security outcomes by different subgroups of the population in the United States has been made by Liu and Rettenmaier (2003), who find that shorter life expectancy of blacks yields a lower return from social security even despite progressive elements in the U.S. social security, which are not in place in the German retirement benefit formula.…”

Occupation-Based Life Expectancy: Actuarial Fairness in Determining Statutory Retirement Age

“…Thus, equal treatment through a uniform statutory retirement age does not do justice to the socially highly unequally distributed life opportunities and is not actuarially fair (Unger and Schulze, 2013). Given a uniform statutory retirement age, Barnay (2007) showed that executives and the intermediate professions benefit much more from the pension system than manual workers. Likewise, several authors concluded that such pension systems generate a Matthew effect, redistributing means from the less well-off to the better-off (Myles, 2003;Schokkaert and Van Parijs, 2003;Queisser and Whitehouse, 2006;Simonovits, 2015).…”