Annuity Markets and Retirement Security

The growing importance of defined contribution pension arrangements has drawn increased attention to the means by which retired people draw down their assets. Current UK law requires annuitisation of at least a fraction of defined contribution plan accumulations. Annuity markets have recently attracted some criticism with respect to pricing and the available range of product options. This paper describes a key feature of voluntary annuity markets: the presence of ‘adverse selection’. This is the tendency of annuitants to live longer than non‐annuitants, since individuals who know that they are likely to die soon do not purchase annuities. The paper presents information that quantifies the importance of adverse selection in the setting of private annuity prices and discusses the role of compulsory annuitisation requirements in reducing it. Requiring individuals to participate in the annuity market can reduce selection effects, at the cost of reducing individuals' range of retirement income options.     

Transfers in Spanish State Retirement Pensions

A central issue in the recent reforms of state pensions in Spain has been to increase the proportionality between contributions and benefits along actuarially fair lines. The aim of this paper is to quantify the transfer component of social security retirement pensions, with transfer being understood as the difference between the pension effectively received and that which would be received under a system of actuarial fairness. The analysis is placed within a life-cycle framework, with particular reference to the distributive effects by income level. The results show that, in the past, there was a marked bias in favour of the objective of intergenerational and intragenerational redistribution, to the detriment of the objective of income insurance. This paper examines the factors that determine the final value of the transfer component within the entire Spanish pensions system.     

Alternative Retirement Income Arrangements and Lifetime Income Inequality: Lessons From Australia

This paper examines the implications for lifetime income equality of alternative retirement income arrangements, using the Australian scheme as a benchmark. In Australia, the pay-as-you go financed age pension is means-tested and thereby provides a contrast with those countries where part or all of a basic pension is paid to all aged persons. Many governments are considering an increase in the level of means-testing. The results show that the introduction of a universal pension coupled with significant changes and simplifications to the structure of taxation and superannuation have little effect on the redistributive impact of the tax structure in a life cycle framework. The presence of means-testing appears to have no significant effect on life-time inequality. The results suggest that it is possible to eliminate complexities from the system providing retirement benefits without having any deleterious effect on equity. This revised version was published online in July 2006 with corrections to the Cover Date.     

养老金业务全面风险管理

随着中国经济和金融体制改革的不断深入,社会保障制度特别是养老金制度也发生了剧烈的变革,逐步建立起社会统筹和个人账户相结合的养老保障体系,包括了国家基本养老保险、企业年金和个人储蓄养老保险三个支柱,养老基金也随之正式登陆中国资本市场。养老金是退休人员的养命钱,其性质决定了它在满足盈利性、流动性的前提下必须保持更低风险的特点,决定了它在风险管理上的高要求。     

The effect of recognition vs. disclosure on investor valuation: The case of pension accounting

Whether or not the format of financial reporting influences user assessment of the reported information is an important issue to the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), and managers. Do investors, in determining security prices, differentiate between information recognized in the balance sheet and that disclosed in the footnotes? The findings indicate that investors appear to consider pension information disclosed in the footnotes as value-relevant, given that an accrued (prepaid) pension liability (asset) is also recognized in the balance sheet. Second, investors attach equal importance to both sorts of pension information.     

Corporate capital structure and pension-funding strategy

This article provides an integrated analysis of pension funding and corporate financing strategies in the presence of default risk. The article shows that when the marginal personal income tax rate is constant, the financing decision with respect to pension funding is influenced entirely by tax considerations. When the marginal personal income tax is progressive, the optimal financing of pension funding depends on the cyclical nature of the firm (as characterized by the sign of beta), the riskiness of pension assets, and ERISA regulations concerning the pension-benefit guaranty rate, the marginal pension insurance premium and the firm's legal responsibility for its unfunded pension obligations. It is shown that a necessary condition for partial pension funding is that the marginal insurance premium imposed by PBGC must be less than actuarially fair, and a necessary condition for pension funding to be financed by both debt and equity is that beta must be positive.     

德国里斯特养老保险计划及其对我国的启示

德国里斯特养老保险计划与我国企业年金几乎同时起步发展,两者都定位于第二层次的补充养老保险,但就目前的发展状况而言却是天壤之别。论文探讨了德国里斯特养老保险计划的规划思路、设计理念、发展特点及其对我国补充养老保险市场的借鉴与启示。文章指出具有补贴性质的类似于德国里斯特养老保险计划的个人储蓄养老保险是撬动我国补充养老保险市场发展的新思路,是推动我国补充养老保险发展壮大的新动力。     

Converting retirement benefit into a life care annuity with graded benefits*

This paper deals with life care annuities, i.e. bundled products comprising a life annuity and long-term care insurance. It aims to assess the cost of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. With this objective in mind, we present an actuarial method based on array calculus for valuing this type of life care annuity. The health dynamics of the annuitant rely on a reversible illness-death multistate framework. The paper contains a numerical example in which mortality and disability assumptions are based on data from the USA and Australia, although this should be viewed simply as an illustration. In addition, in order to check the coherence of these data, we compute life expectancy for both healthy and dependent persons, and then for dependent persons in each of the states of dependence. The effect of ruling out the recovery assumption on the annuity’s cost is also assessed. The analysis provides valuable insights into how much it would cost to introduce these annuities and enables us to make some policy recommendations to help ensure that this combined pension scheme has a good actuarial design.     

Pension Prefunding, Ageing, and Demographic Uncertainty

Pension prefunding can be used to smooth contribution rates in economies where ageing will increase pension expenditure. But how extensive should prefunding be in a defined benefit pension system when there is considerable uncertainty concerning future mortality, fertility, and migration? We study the prefunding rules in the Finnish earnings-related pension system with an OLG simulation model. The results show that increasing the degree of prefunding could yield a more even intergenerational outcome and make future generations' position better, but it is quite possible to overshoot and harm current generations too much. Making the degree of prefunding fertility-dependent appears to be a useful alternative. With declining fertility, current large cohorts would pay modestly increased contributions. The accumulated funds, however, will be huge in relation to the wage bills of smaller future cohorts.     

The Long-run Effects of the Italian Pension Reforms

The paper analysesthe reforms of the Italian mandatory pension scheme for employeeslegislated in the 1990s. To assess the effects of the reforms,a microsimulation model calibrated on cross-section data is developed.The model is aimed at estimating the average income of a memberof a cohort, as well as the average per capita income of allindividuals alive in a given year. The long-run effects of thereform are analysed, comparing the characteristics of alternativefinancing schemes. A substantial improvement of the equity aswell as the long-run sustainability of the Italian public pensionschemes emerges. However, the dreary demographic scenario callsfor further tightening of eligibility rules sometime in the nextdecades if long-run sustainability of public debt is to be achieved.On the basis of sensitivity analysis, some changes aimed at hedgingthe system against unexpected shocks are suggested.     

Some Implications of Changing the Tax Basis for Pension Funds

Governments in many developed economies provide private pension plans with significant taxation incentives. However, as many retirement income systems are now being reviewed due to demographic, social and economic pressures, these taxation arrangements are also under scrutiny. This paper discusses some of the implications of the differences between the traditional taxation treatment adopted by most OECD nations and that adopted by Australia, where there is a tax on contributions, a tax on investment earnings and a tax on benefits. The results show that there are significant differences in the net value of the benefits received by individuals and the taxation revenue received by the government. On the other hand, it is shown that there is remarkably little to distinguish between the two tax structures in terms of summary measures of lifetime income, although the form in which the benefit is taken in retirement is significant in influencing intragenerational equity.     

论社会保障

在对美国社会保障制度改革的政策建议中,彼得·戴蒙德教授主张通过养老金相关参数的调整来适应未来养老基金支出增长的压力,方式是改善养老金待遇标准和税收规则以确保养老基金的精算平衡。其基本观点是:第一,社会保障是退休后收入的基础,是防止贫困和失去保险机会的保障,所以社会保障制度应该建立;第二,因为人们很少自愿进行养老金积累,年金化的强制性公共养老金就非常重要,一是能平衡终生收入,二是能够提供就业激励;第三,公共养老金计划对工人及其家庭,特别是儿童、配偶和遗属有重要保障作用;第四,延迟退休能提高未来的消费,设计合理的待遇累进原则和退休审查制度会有助于增加劳动激励;第五,养老金的代际转移是一种再分配,较多的再分配会对工作生涯形成激励;第六,为实现精算平衡,应引入自动平衡机制来自动调整税率和待遇水平,以减少立法的压力。     

Social Security,Unemployment, and Growth

The paper develops an overlapping generations model that highlights interactions between social security, unemployment and growth. The social security system has two components: old age pensions and unemployment insurance. Pensions have a direct effect on economic growth. Both pensions and unemployment benefits influence equilibrium unemployment caused by wage bargaining. Since unemployment deteriorates growth, both types of social security have an indirect negative effect on growth.JEL Code: E24, H55, J51     

Compulsory Savings: Efficiency and Redistribution On the Interaction of Means Tested Basic Income and Public Pensions

In the presence of means tested basic income for old age, households will tend to reduce precautionary savings to an inefficiently low level. We explore how this might serve as a justification for a compulsory public pension system. In a representative agent framework with two income types, compulsory savings are found to be Pareto-improving up to a point. Beyond that point, increases in contribution rates simply result in increasingly regressive (implicit) taxation. Similar results are found for pay-as-you-go pensions. On the basis of our model we argue that the introduction of a funded pension component may help the German pension system to cope with demographic change more efficiently.     

Strategic asset allocation for a country: the Norwegian case

This paper develops a simple strategic asset allocation model for a country with non-tradable assets and liabilities. Contemporaneous correlation does not capture the long-term relationship between the non-tradable items and the financial assets. I apply cointegration and duration matching to better identify the long-term relationship. The model is applied to the case of Norway. Simulations suggest that Norway should implement a strategy which entails a higher proportion (than today’s strategy) invested in stocks. Although the new strategy is superior in several criteria and as Norway reforms its social security system, there is still considerable risk that Norway will fail to meet its liabilities.      

职业福利功能之争

对职业福利功能的判断或定位,决定了在职业福利发展及其与公共福利的合作机制方面的政府政策引导方向、力度、方式或方法。国内外学者对本国或世界范围内公共福利与职业福利作用关系的实际考察发现:补充理论、替代理论和福利多元主义理论对职业福利的功能做出了不同的判断。由于对各福利供给主体功能等价原则以及国家之外的福利供给主体对国家的替代能力的质疑,替代理论和福利多元主义理论缺少广泛支持;对公共福利的补充功能成为世界范围内职业福利的功能定位。然而,职业福利本身具有高度复杂性,要使职业福利充分发挥补充功能,仍需对其本身进行深入研究。