The Financial Stability of Notional Account Pensions

Valdés‐Prieto, Salvador

doi:10.1111/1467-9442.03205

Cited by 95 publications

(73 citation statements)

References 5 publications

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“…This government debt yields a rate of return related to the growth rate of the premium base. If this non-tradable government debt 28 were valued, it would become clear that part of the contributions is in fact employed to service the implicit debt in the pay-as-you-go system, due to the gift to the first generation (see Valdés-Prieto (2000) and see Valdés-Prieto (2006)). …”

Section: Payg As Ndcmentioning

confidence: 99%

Personal Pensions with Risk Sharing. Affordable, Adequate and Stable Private Pensions in Europe

Bovenberg

Nijman

2015

SSRN Journal

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Private pension provision faces the challenging task of providing stable income streams during retirement. The challenge has increased markedly in the last decades due to volatile financial markets, falling interest rates and the withdrawal of employers and external insurers as risk bearers of systematic financial and longevity risks. Partly because of these developments, policyholders desire pensions tailored to their individual needs. This paper proposes a new type of pension: the Personal Pension with Risk sharing (PPR). By unbundling and valuing the investment, (dis)saving, insurance and risk-sharing functions of pensions, PPRs allow risk management and (dis)saving to be customized to the specific features of heterogeneous individuals. Moreover, unlike variable annuities, PPRs allow investment risks to be combined with longevity insurance without giving rise to high year-on-year volatility in consumption streams or opaque and rigid valuation and smoothing rules. The unbundling of functions in the PPR also deepens the internal markets for financial and insurance products while at the same time accommodating the diverse traditions of countries in terms of occupational pension provision. Finally, the PPR reconciles financial, fiscal and macroeconomic stability with growth by increasing the supply of long-term risk-bearing and illiquid capital, complementing public retirement provision, reducing the interest-rate sensitivity of pensions and smoothing shocks. 1 The authors thank Casper van Ewijk for helpful comments on an earlier draft. Errors and misperceptions remain the exclusive responsibility of the authors.

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Section: Payg As Ndcmentioning

confidence: 99%

Personal Pensions with Risk Sharing. Affordable, Adequate and Stable Private Pensions in Europe

Bovenberg

Nijman

2015

SSRN Journal

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“…For example, Sweden pioneered a novel approach in 1998 by adopting an automatic balance mechanism that ensures its pension system's financial viability at a constant payroll tax rate (Valdes-Prieto, 2002). One feature of this mechanism links the amount paid to changes in life spans.…”

Section: Social Contracts Should Distinguish Between Risks That Benefmentioning

confidence: 99%

Repairing the Budget Contract between Citizens and the State

Schick¹

2011

OECD Journal on Budgeting

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This article argues that the budget is essentially a contract between citizens and the state, and that the contract is in a great state of disrepair. The ongoing debate and action in OECD countries should focus on post-crisis revenue and expenditure policies in order to repair this contract. The combination of fiscal stress, high expectations and citizen mistrust, however, greatly complicates the task. JEL classification: A130, H500, H600 Keywords: budget as contract, citizen expectations, citizen participation in government, trust in government, sustainable revenue and expenditure policies, accountability

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“…6 Since benefits in a NDC plan grow with earnings, a perfect matching asset for the accumulation phase would be either (zero-coupon) wage-indexed bonds or -since the 4 For example, attempts to provide guaranteed minimum returns within FDC plans tend to reduce total returns. 5 Valdés-Prieto (2000, 2004 provides the formal conditions under which a FDC plan can replicate a mature NDC plan: (a) the FDC plan is taxed to equalise returns, (b) the NDC plan is heavily guaranteed by the State, and (c) the FDC plan is fully invested in long term public debt. The two plans will, however, differ during a transition arising from changes in the population growth rate.…”

Section: Can Ndc Be Replicated In a Fdc Framework?mentioning

confidence: 99%