The Actuarial Balance of the PAYG Pension System: The Swedish NDC Model versus the DB-Type Models

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

doi:10.1596/9780821394786_ch23

Cited by 24 publications

(15 citation statements)

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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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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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“…Anyone with any knowledge of financial matters can understand the ABS and the way it expresses the pension system's financial situation [28].…”

Section: Summary Conclusion and Future Researchmentioning

confidence: 99%

“…This paper builds on previous work carried out in the field of actuarial balances [11,[20][21][22][23][24][25][26][27][28][29][30][31][32][33]. All of these have dealt with the Swedish-type ABS, which has been compiled for various countries including Sweden [10,24,27,28], Spain [24,31], Japan [21], Canada [6,30], New Zealand [25], Germany [33] and Switzerland [11].…”

Section: Introductionmentioning

confidence: 99%

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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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“…There are strong indications that the current accounting of contribution revenue and benefit expenditure in some of the NDC countries has a lot of room for improvement before an effective balancing mechanism can be developed. In contrast to the empirical ambiguities of NDC countries, academic research has produced a number of proposals on how best to select the account and benefit indexation variables to achieve sustainability and/or liquidity of an NDC scheme, or to correct through ABM approaches (e.g. Gronchi and Nisticò, , ; Boado‐Penas and Vidal‐Meliá, ; Alonso‐Garcia and Devolder, ).…”

Section: Key Frontiers In the Design And Implementation Of Ndc Schemesmentioning

confidence: 99%

The ABCs of nonfinancial defined contribution (NDC) schemes

Holzmann

2017

Int Social Security Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in The ABCs of Nonfinancial Defined Contribution (NDC) Schemes August 2017Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Policy Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. link of a financial defined contribution (FDC) personal account scheme, but is based on the pay-as-you-go format. At its start-up, the pay-as-you go commitments of the preceding defined benefit (DB) system are converted into individual personal accounts, allowing for a smooth transition from the DB to the DC format, while avoiding the very high transition costs inherent in a move from a traditional pay-as-you-go DB scheme to a fully funded FDC scheme. The NDC approach implemented by the rule book is able to manage the economic and demographic risks inherent to a pension scheme and by design creates financial sustainability. As in any pension scheme, the linchpin between financial stability and adequacy is the retirement age; in the NDC approach the individual retirement age above the minimum age is by design self-selected and by incentives should increase the effective retirement age in line with population aging. As a systemic reform approach NDC has become a strong competitor to piecemeal parametric reforms of traditional nonfinancial DB (NDB) schemes. While frequent, these reforms are far from transparent and usually too timid and too late to create financial sustainability while providing adequate pensions for the average contributor. This paper offers a largely nontechnical introduction to NDC schemes, their basic elements and advantages over NDB schemes, the key technical frontiers of the a...

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The Actuarial Balance of the PAYG Pension System: The Swedish NDC Model versus the DB-Type Models

Cited by 24 publications

References 21 publications

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

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.

The ABCs of nonfinancial defined contribution (NDC) schemes

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