0000000000827597
AUTHOR
Carlos Vidal-meliá
Integrating retirement and permanent disability in NDC pension schemes
ABSTRACTIn this article, we develop a theoretical basis for integrating retirement and permanent disability using a generic nonfinancial defined contribution framework. The methodology we use relies on a multistate overlapping generations model that includes the so-called survivor dividend. Currently, this feature can only be found in the Swedish defined contribution (DC) scheme. The results achieved in the numerical example we present endorse the fact that the model works well. Special attention is given to the assumptions made about mortality rates for disabled people and disability incidence rates, which largely determine the contribution rate assigned to disability. The model could be o…
Integrating Retirement and Long-Term Care (LTC) Annuities Using a Notional Defined Contribution (NDC) Framework
This paper examines the possibility of embedding public long-term care (LTC) insurance within the retirement pension system, i.e. introducing life care annuities (LCAs) into a notional defined contribution (NDC) framework. To do this we develop a multistate overlapping generations model (MOLG) that includes the so-called survivor dividend and give special attention to the assumptions made about mortality rates for dependent persons and LTC incidence rates, which largely determine the contribution rate assigned to LTC. The proposed model could be of interest to policymakers because it could be implemented without too much difficulty, it would universalize LTC coverage with a "fixed" cost, an…
Notes on Using the Hidden Asset or the Contribution Asset to Compile the Actuarial Balance for Pay-as-You-Go Pension Systems
The aim of this paper is twofold: to determine the connection between the “contribution asset” and the “hidden asset” and to discover whether using either of them to compile the actuarial balance in Swedish-type pay-as-you-go pension systems will provide a reliable solvency indicator. We develop an overlapping generations model and apply it to the defined benefit pay-as-you-go system, although it would be just as valid for NDC systems. On the theoretical side the main conclusion is that, despite their very different natures, in a simplified scenario the contribution asset and the hidden asset could coincide if r - the real rate of interest - is equal to the growth in the wage bill. On the a…
Converting Retirement Benefit into a Life Care Annuity with Graded Benefits: How Costly Would it Actually Be?
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 …
The Tax Justice Network-Africa v Cabinet Secretary for National Treasury & 2 Others: A Big Win for Tax Justice Activism?
This paper develops an optimization model for selecting a large subsample that improves the representativeness of a simple random sample previously obtained from a population larger than the population of interest. The problem formulation involves convex mixed-integer nonlinear programming (convex MINLP) and is therefore NP-hard. However, the solution is found by maximizing the “constant of proportionality” – in other words, maximizing the size of the subsample taken from a stratified random sample with proportional allocation – and restricting it to a p-value high enough to achieve a good fit to the population of interest using Pearson’s chi-square goodness-of-fit test. The beauty of the m…
El balance actuarial del sistema de reparto. Modelo ‘sueco’ frente a modelo ‘EE.UU.’: posible aplicación al caso español
RESUMENEl objetivo de este trabajo es arrojar luz sobre los dos principales metodos que aplican las administraciones publicas de la Seguridad Social al formular el balance actuarial, realizando especial hincapie en sus enfoques metodologicos, aspectos actuariales aplicados y resultados mas recientes con el fin de identificar sus diferencias y similitudes mas notables. Asimismo, se intenta mostrar la conveniencia de incorporar, al sistema publico de pensiones espanol, la obligatoriedad de elaborar un balance actuarial anual para mejorar su transparencia, solvencia, y facilitar el trabajo de las comisiones habilitadas con la finalidad de establecer las lineas de actuacion y las reformas a int…
An NDC approach to helping pensioners cope with the cost of long-term care
The aim of this paper is to analyse whether it would be possible to provide retirement and long-term care benefits using the same unfunded notional defined contribution scheme. We extend the multi-state overlapping generations model developed by Pla-Porcel et al. (2016) to include two new features: a long-term care benefit graded according to the annuitant's degree of disability and a minimum pension benefit for both contingencies. This brings the model closer to the reality of social insurance and enhances its political attractiveness. The paper contains a numerical example to show how the model functions and focuses especially on the mortality rates for dependent persons, the inception ra…
Automatic regrouping of strata in the goodness-of-fit chi-square test
Pearson’s chi-square test is widely employed in social and health sciences to analyze categorical data and contingency tables. For the test to be valid, the sample size must be large enough to provide a minimum number of expected elements per category. This paper develops functions for regrouping strata automatically no matter where they are located, thus enabling the goodness-of-fit test to be performed within an iterative procedure. The functions are written in Excel VBA (Visual Basic for Applications) and in Mathematica. The usefulness and performance of these functions is illustrated by means of a simulation study and the application to different datasets. Finally, the iterative use of …
Will it Last? An Assessment of the 2011 Spanish Pension Reform Using the Swedish System as Benchmark
The aim of this paper is to make an assessment of the 2011 reform of the public pension system in Spain using the Swedish pension system as a benchmark, although some reference to the US pension system is also made. The paper focuses on the reform, explaining its aims, breaking down the main contents, critically examining the official view and describing the expected ageing of the Spanish population. This approach complements the quantitative analyses performed by other researchers and will enable us to assess the reformed system with the focus on four main areas: actuarial fairness, actuarial transparency, solvency and communication with the public. The main conclusion is that the reform w…
Actuarial accounting for a notional defined contribution scheme combining retirement and longterm care benefits
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 tr…
Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits
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 consid…
Selection of Large Sub-Samples from the Continuous Sample of Working Lives Representative of the Benefits Provided by the Spanish Public Pension System
The Continuous Sample of Working Lives (CSWL) is a set of anonymized microdata with information about individuals taken from Spanish Social Security records. It provides very valuable information, which is used in many studies on labor economics and in the analysis of the Spanish public pension system. This article presents two major contributions: The first is an analysis of how representative CSWL is of the population of pensioners for the period 2005-2013. It is concluded that the CSWL does not follow the same distribution as the population with respect to some types of benefits, and that this happens in most waves. One of the reasons is that it is obtained by simple random sampling, so …
AN ACTUARIAL BALANCE SHEET MODEL FOR DEFINED BENEFIT PAY-AS-YOU-GO PENSION SYSTEMS WITH DISABILITY AND RETIREMENT CONTINGENCIES
AbstractIn this paper, we develop a theoretical basis for drawing up a “Swedish” type actuarial balance sheet for a defined benefit pay-as-you-go (DB PAYG) scheme with retirement and disability benefits. Our model enables us to obtain the system's expected average turnover duration, measure the scheme's solvency and explore the phenomenon identified as “pension reclassification”, a widespread practice that masks the system's real status unless further pension information becomes available. The model is clearly linked to actuarial practice in social security and gives partial support to the practical adaptation of Swedish methodology carried out by OSFI (2012) in applying the concept of the …
The Actuarial Balance Sheet for Pay-As-You-Go Finance: Solvency Indicators for Spain and Sweden
This paper provides the first estimate of the actuarial balance of the Spanish contributory pension system for the old-age contingency, based on official data. The main accounting entries are developed from the principles of double-entry bookkeeping. The novel entry in the balance sheet, entitled the ‘contribution asset’ or ‘hidden asset’, is at the centre of the theoretical discussion. A comparison between the official balance sheet for the Swedish notional account system and our balance sheet for the Spanish contributory pension system is also provided. The main finding is that the Spanish pension system has an insolvency rate of 31.4 per cent. The policy implication is that unless curren…
A Procedure for Selecting Representative Subsamples of a Population from a Simple Random Sample
This paper proposes a procedure for selecting large subsamples drawn from a large simple random sample that are more representative of the population under study. By means of the so-called constant of proportionality, the procedure seeks to maximize the size of the subsample taken from a stratified random sample with proportional allocation, restricting it to a p-value high enough to achieve a good fit using Pearson’s chi-square goodness of fit test. The user has the freedom to choose between a larger subsample with poorer adjustment or a smaller subsample with a better fit. We use the Continuous Sample of Working Lives (CSWL), a set of micro data taken from Spanish Social Security records,…
A “Swedish” actuarial balance for a notional defined contribution pension scheme with disability and minimum pension benefits
This article proposes a “Swedish” type actuarial balance sheet (ABS) for a notional defined contribution (NDC) scheme with disability and minimum pension benefits. The proposed ABS splits the pension system in two parts: the pure NDC part and the redistributive part, which includes the assets and liabilities originating from non-contributory rights. The article contains a numerical example that sheds light on the real applicability of our proposal. The model has practical implications that could be of interest to policy-makers, given that it integrates actuarial and social aspects of public pensions and discloses the real cost of redistribution through minimum pensions.
An assessment of the 2011 Spanish pension reform using the Swedish system as a benchmark
AbstractThe aim of this paper is to make an assessment of the 2011 reform of the public pension system in Spain using the Swedish pension system as a benchmark, although some reference to the US pension system is also made. The paper focuses on the reform, explaining its aims, breaking down the main contents, critically examining the official view and describing the expected ageing of the Spanish population. This approach complements the quantitative analyses performed by other researchers and will enable us to assess the reformed system with the focus on four main areas: actuarial fairness, actuarial transparency, solvency and communication with the public. The main conclusion is that the …
Automatic Balance Mechanisms in Pay-As-You-Go Pension Systems
This paper shows the usefulness of the automatic balance mechanisms (ABMs) and explores the issue of introducing an ABM into the Spanish public contributory retirement pension system. We define the concept of the automatic balance mechanism and carry out an analysis of those existing in Sweden, Canada, Germany, Japan and Finland. We also present an indicator of the Spanish system's solvency which emerges from the actuarial balance sheet, and simulate the effect that certain changes in the parameters of the present system would have on solvency, showing the direction that could be taken if the mechanism were to be introduced in Spain. The main conclusion reached is that, given the system's s…
Individuelle Altersrenteninformationen für Beitragszahler: Empfehlungen für Spanien auf der Grundlage internationaler Erfahrungen
Auszug In diesem Artikel mochten wir in groben Zugen Richtlinien skizzieren fur die Gestaltung eines Informationsbriefs an Personen, die Beitrage an das spanische staatliche Rentensystem entrichten, falls je ein solches Instrument zum Einsatz kommen sollte. Anhand internationaler Erfahrungen und veroffentlichter Forschungsarbeiten in diesem Bereich untersuchen wir das Konzept der „individuellen Renteninformation“ und ermitteln dessen wichtigste Merkmale. Anschliesend beschreiben wir zwei Modelle fur die individuelle Renteninformation (aus den Vereinigten Staaten und Schweden) im Detail und richten unsere Aufmerksamkeit insbesondere darauf, wie sie strukturiert sind, welche Aspekte verbesser…
How Do Unisex Life Care Annuities Embedded in a Pay-As-You-Go Retirement System Affect Gender Redistribution?
This paper deals with the idea of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. Based on accurate biometric data from Australia and the US, the paper shows that using gender-neutral annuity factors to compute the initial benefit involves a large increase in ex-ante gender redistribution compared to a system without long-term coverage. In spite of the very different biometric data, the results are surprisingly similar for both countries. To disentangle the hidden redistribution, a methodology based on conversion (actuarial) factors is used. The value of the actuarial factor relies on a multistate framewor…
Nonfinancial defined contribution pension schemes: is a survivor dividend necessary to make the system balanced?
The survivor dividend, at a specific age, is the portion of participants’ credited account balances that is distributed on a birth cohort basis from the account balances of participants who do not survive to retirement. This article develops a model to show whether it would be justified to include the survivor dividend in the calculation of affiliate pension balances. The main findings are that the survivor dividend has a strong financial basis which enables the macro contribution rate applied to be the same as the individual credited rate, and that including the survivor dividend in the calculation of the initial pension is not irrelevant because the initial pension could rise by up to 21.…
"Compiling the Actuarial Balance for Pay-As-You-Go Pension Systems. Is it better to use the Hidden Asset or the Contribution Asset?"
The aim of this paper is twofold: to establish the connection between the "contribution asset" (CA) and the "hidden asset" (HA) and to determine whether using either of them to compile the actuarial balance sheet in the pay-as-you-go (PAYG) pension system will provide a reliable solvency indicator. With these aims in mind, we develop a model based on those first put forward by Settergren and Mikula (2005) and Boado-Penas et al. (2008) to obtain the analytical properties of the CA and to confirm its soundness as a measure of the assets of a PAYG scheme. Our model also enables us to explore whether, and to what extent, the HA can be considered a second alternative measure of the assets for PA…
[Mortality and life expectancy trends for male pensioners by pension income level]
We draw on the Continuous Sample of Working Lives (CSWL) to investigate the differences in socioeconomic mortality among retired men aged 65 and above, over the longest possible period covered by this data source: 2005–2018. This paper deals with the case of Spain, since very little evidence concerning retirement pensioners is available for this country. The only indicator of socioeconomic status we use is the amount of the initial pension of the retired population. For 2005-2010 we find a gap in life expectancy of 1.49 years between pensioners in the highest and lowest income groups. This gap widens over time and reaches 2.58 years for the period 2015–2018. The increase in life expectancy …
LIFE CARE ANNUITIES (LCA) EMBEDDED IN A NOTIONAL DEFINED CONTRIBUTION (NDC) FRAMEWORK
AbstractThis paper examines the possibility of embedding public long-term care (LTC) insurance within the retirement pension system, i.e. introducing life care annuities into a notional defined contribution framework. To do this, we develop a multistate overlapping generations model that includes the so-called survivor dividend and give special attention to the assumptions made about mortality rates for dependent persons and LTC incidence rates, which largely determine the contribution rate assigned to LTC. The proposed model could be of interest to policymakers because it could be implemented without too much difficulty, it would universalize LTC coverage with a “fixed” cost, and it would …
Demand for life annuities from married couples with a bequest motive
The aim of this paper is to explain the ‘annuities puzzle’ in greater depth by introducing the bequest motive. It will try to determine whether this motive really is a relevant feature influencing the demand for life annuities from married couples. With this aim in mind, we develop an optimization model of the utility provided by purchasing a life annuity with contingent survivor benefit or a joint survivor life annuity. Our model is based on that first put forward by Brown and Poterba (2000), to which we have added elements from other models, such as Friedman and Warshawsky's (1990) and Vidal and Lejárraga's (2004), which include the bequest motive. This will enable us to calculate the ann…
Does the Pension System’s Income Statement Really Matter? A Proposal for An NDC Scheme with Disability and Minimum Pension Benefits
This paper develops a full accounting model for monitoring the solvency of a notional defined contribution (NDC) pension scheme with disability and minimum pension benefits. Using the annual report of the Swedish pension system as a benchmark (TSPS, 2019), we extend the “Swedish” actuarial balance developed by Perez-Salamero et al. (2017) by adding an income statement which fully explains the reasons behind the changes in the system’s solvency by type of benefit. In line with the reference model, assets and liabilities are measured at present value at each reporting date, and changes in present value are reported in each period as income or expenses and are included on the income statement.…
Converting retirement benefit into a life care annuity with graded benefits
AbstractThis 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 illustrat…
From “Table 29” to the actuarial balance sheet: is it really that big a leap?
EU regulations since 2017 have required all Member States to disclose their accrued-to-date pension liabilities (ADL) using a standard actuarial cost method and some common assumptions. This applies to both Social Security (SS) schemes and unfunded defined benefit (DB) schemes covering civil servants. These pension liabilities have to be disclosed in a supplementary table referred to as Table 29. An actuarial balance sheet (ABS) can be defined as a financial statement that lists a pension system's obligations to contributors and pensioners at a particular date, together with the amounts of the assets (financial and in particular those from contributions) that underwrite those commitments. T…
An Actuarial Balance Model for DB PAYG Pension Systems with Disability and Retirement Contingencies
In this paper we develop a theoretical basis for drawing up a “Swedish” type actuarial balance sheet for a defined benefit pay-as-you-go (DB PAYG) scheme with retirement and disability benefits. Our model enables us to obtain the system's expected average turnover duration, measure the scheme's solvency and explore the phenomenon identified as “pension reclassification”, a widespread practice that masks the system's real status unless further pension information becomes available. The model is clearly linked to actuarial practice in social security and gives partial support to the practical adaptation of Swedish methodology carried out by OSFI (2012) in applying the concept of the contribut…
Es La Mcvl Representativa De Las Prestaciones Del Sistema PPblico De Pensiones? (Is the Continuous Sample of Working Lives (CSWL) Representative of the Benefits Provided by the Spanish Public Pension System?)
Spanish Abstract: En este trabajo se examina si los datos sobre pensiones incluidos en la Muestra Continua de Vidas Laborales (MCVL) son validos para realizar cierto tipo de proyecciones sobre la sostenibilidad del sistema publico de pensiones. Se analiza al conjunto de datos de prestaciones de la muestra teniendo en cuenta los datos agrupados por tipo de pension, grupos de edad y genero, asi como por cuantia. Despues de realizar las pruebas estadisticas apropiadas sobre el ajuste de la muestra a la poblacion, se concluye que la MCVL, en su conjunto, no refleja la distribucion seguida por la poblacion respecto a alguno de los tipos de prestaciones, por edad y genero. Este resultado advierte…
Improving the Representativeness of a Simple Random Sample: An Optimization Model and Its Application to the Continuous Sample of Working Lives
This paper proposes an optimization model for selecting a larger subsample that improves the representativeness of a simple random sample previously obtained from a population larger than the population of interest. The problem formulation involves convex mixed-integer nonlinear programming (convex MINLP) and is, therefore, NP-hard. However, the solution is found by maximizing the size of the subsample taken from a stratified random sample with proportional allocation and restricting it to a p-value large enough to achieve a good fit to the population of interest using Pearson&rsquo
Notional defined contribution pension schemes: Why does only Sweden distribute the survivor dividend?
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 contribu-tors who reach retirement age always get a higher r…
La información individual para el cotizante: algunas recomendaciones para el caso español a partir de la experiencia internacional
Este articulo tiene por objetivo definir directrices basicas para facilitar el eventual diseno de un boletin de informacion que se enviaria a los cotizantes del sistema estatal de pensiones de Espana, en caso de adoptarse dicho instrumento. Inspirandonos de la experiencia internacional y de la investigacion realizada en este ambito por Jackson (2005), Larsson, Sunden y Settergren (2008) y Sunden (2009), investigamos el concepto de informacion individual sobre pensiones y determinamos sus principales caracteristicas. Luego, describimos en detalle dos modelos de suministro de informacion individual sobre pensiones, el de los Estados Unidos y el de Suecia, haciendo hincapie en su estructura, e…
How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?
This paper aims to assess gender redistribution when using unisex conversion factors to compute the initial benefit of life care annuities (LCAs) embedded in a pay-as-you-go (PAYG) pension system. We use a method based on actuarial factors to disentangle the hidden redistribution of LCAs with graded benefits. The value of the actuarial factor relies on a multistate framework in which transitions are modeled from the initial health state to the absorbing state. According to our calculations for Australia and the US, the amount of gender redistribution is by no means irrelevant. In spite of the very different biometric data, the results are surprisingly similar for both countries. Risk equali…
A Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits
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 tr…
Is the Reform of the Spanish Public Pension System of 2011 Justified from an Actuarial Point of View?
The aim of this paper is basically to answer three questions about the Spanish public retirement pension system. Is the 2011 reform of the system, which will gradually come into force starting on 1-01-2013, justified from an actuarial point of view? What measures would have been adopted in the Spanish system if all the accounting principles applied in the notional account pension system in Sweden were enforced? What measures would be adopted if current legislation on defined benefit private pension plans were applied to the system? To this end we formulate a Swedish-type actuarial balance for the Spanish public retirement pension system as at 31-12-2010 and project a solvency indicator for …
The actuarial balance of the pay-as-you-go pension system: "US" model versus "Swedish" model: Possible application in the case of Spain
Spanish Abstract: El objetivo de este trabajo es arrojar luz sobre los dos principales metodos que aplican las administraciones publicas de la Seguridad Social al formular el balance actuarial, realizando especial hincapie en sus enfoques metodologicos, aspectos actuariales aplicados y resultados mas recientes con el fin de identificar sus diferencias y similitudes mas notables. Asimismo, se intenta mostrar la conveniencia de incorporar, al sistema publico de pensiones espanol, la obligatoriedad de elaborar un balance actuarial anual para mejorar su transparencia, solvencia, y facilitar el trabajo de las comisiones habilitadas con la finalidad de establecer las lineas de actuacion y las ref…
The continuous sample of working lives: Improving its representativeness
This paper studies the representativeness of the Continuous Sample of Working Lives (CSWL), a set of anonymized microdata containing information on individuals from Spanish Social Security records. We examine several CSWL waves (2005–2013) and show that it is not representative for the population with a pension income. We then develop a methodology to draw a large dataset from the CSWL that is much more representative of the retired population in terms of pension type, gender and age. This procedure also makes it possible for users to choose between goodness of fit and subsample size. In order to illustrate the practical significance of our methodology, the paper also contains an applicatio…
A "Swedish" actuarial balance sheet for a notional defined contribution pension scheme with disability and retirement benefits
This paper proposes a “Swedish” type actuarial balance sheet for a notional defined contribution scheme embedding disability insurance within the retirement pension system. The underlying framework supporting the actuarial balance relies on a multistate overlapping generations model that includes the so-called survivor dividend and a minimum pension benefit for both contingencies. The proposed ABS splits the system into two parts: the actuarial part (pure NDC) and the redistributive part, which includes the assets and liabilities originating from non-contributory rights. The paper also contains a numerical example that sheds light on the real applicability of our proposal and confirms that …
Individual information for pension contributors: Recommendations for Spain based on international experience
The aim of this article is to establish basic guidelines to support the possible design of an information letter to be sent to individuals who contribute to the Spanish state pension system, should a decision ever be taken to adopt such an instrument. Basing our work on international experience and published research in the field, we look into the concept of “individual pension information” and identify its most relevant features. We then give detailed descriptions of two models for the provision of individual pension information (the United States and Sweden), looking in particular at how these are structured, what aspects could be improved and their limitations. Finally, we offer recommen…
Differences in Life Expectancy Between Self-Employed Workers and Paid Employees when Retirement Pensioners: Evidence from Spanish Social Security Records
The aim of this paper is to examine differences in life expectancy (LE) between self-employed (SE) and paid employee (PE) workers when they become retirement pensioners, looking at levels of pension income using administrative data from Spanish social security records. We draw on the Continuous Sample of Working Lives (CSWL) to quantify changes in total life expectancy at age 65 (LE(65)) among retired men over the longest possible period covered by this data source: 2005–2018. These changes are broken down by pension regime and initial pension income level for three periods. The literature presents mixed evidence, even for the same country–for Japan and Italy, for example–with some studies …
Selecciin De Sub-Muestras De Gran Tamaao De La Mcvl Representativas De Las Prestaciones Del Sistema PPblico De Pensiones (Selection of High Size Sub-Samples from the Continuous Sample of Working Lives (CSWL) Representative of the Benefits Provided by the Spanish Public Pension System)
Spanish Abstract: La Muestra Continua de Vidas Laborales (MCVL) es un conjunto de microdatos individuales anonimizados extraidos de los registros de la Seguridad Social de Espana. Es una fuente muy valiosa de informacion utilizada en numerosos estudios sobre Economia laboral y sobre el sistema publico de pensiones espanol. Este articulo presenta dos importantes aportaciones. Por un lado se analiza la representatividad de la MCVL respecto de la poblacion de pensionistas para el periodo 2005-2013. Se concluye que no es representativa en determinados tipos de prestaciones y esto ocurre en casi la totalidad de los anos considerados. Una de las razones es que la MCVL se obtiene mediante un muest…
Son Actuarialmente Justas Las Tarifas Para Determinar El Coste De Las Pensiones Derivadas De Accidentes De Trabajo? Annlisis Del Perrodo 2011-2015 (Are the Rates Levied to Cover the Cost of Pensions for Occupational Injury and Disease Actuarially Fair? An Analysis for the Period 2011-2015)
Spanish Abstract: Este trabajo analiza si las tarifas que se aplican para la determinacion del denominado “capital coste” de pensiones derivadas de los accidentes de trabajo (AT) y enfermedades profesionales (EP) son las adecuadas, y si la falta de actualizacion periodica ha producido distorsiones financieras entre los actores implicados. A partir de los datos de la Muestra Continua de Vidas Laborales (MCVL) y de la evolucion de la longevidad de la poblacion general en Espana, se estiman tablas de mortalidad para las contingencias de viudedad e invalidez, que combinadas con los parametros economicos y financieros apropiados, permiten construir las bases tecnicas actuarialmente justas para c…
An Integrated Notional Defined Contribution (NDC) Model with Retirement and Permanent Disability
In this paper we develop a theoretical basis for integrating retirement and permanent disability using a generic NDC framework. The methodology used relies on a multistate overlapping generations model that includes the so-called survivor dividend. Currently this feature can only be found in the Swedish defined contribution (DC) scheme. The results achieved in the numerical example we present endorse the fact that the model works well. Special attention is given to the assumptions made about mortality rates for disabled people and disability incidence rates, which largely determine the contribution rate assigned to disability. The model could be of interest to policymakers because, after so…
Should a Survivorship Dividend Be Included in Notional Defined Contribution Accounts (NDCs)?
The aim of this paper is to analyse the role of the survivor dividend in notional defined contribution (NDC) pension schemes. With this aim in mind, we first extend the model developed by Boado-Penas & Vidal-Melia (2014) by allowing for changes in the growth of the active population. We then compute the effect of the survivor dividend on the relationship between the individual’s internal rate of return for contributors who reach retirement age and the system’s internal rate of return. Finally we develop the main entries to include on the system's actuarial balance sheet. The model endorses the idea that the survivor dividend has a strong basis for enabling the NDC scheme to achieve financia…
Notional defined contributions (NDC): Solvency and risk in Spain
The aim of this article is twofold: to demonstrate the actuarial imbalance in the Spanish pension system in its current form; and to measure the degree of aggregate economic risk to which pensioners are exposed when applying formulas for the calculation of retirement pensions based on notional accounts. The model used generates scenarios for various periods encompassing some 10,000 different permutations of the macroeconomic indices needed to calculate such parameters as initial pension, earnings replacement rate, or internal rate of return and value at risk. The findings are analysed both objectively and subjectively. The main conclusions are that if the projections for the macroeconomic i…
Mortality and life expectancy trends in Spain by pension income level for male pensioners in the general regime retiring at the statutory age, 2005-2018
Abstract Background Research has generally found a significant inverse relationship in mortality risk across socioeconomic (SE) groups. This paper focuses on Spain, a country for which there continues to be very little evidence available concerning retirement pensioners. We draw on the Continuous Sample of Working Lives (CSWL) to investigate disparities in SE mortality among retired men aged 65 and above over the longest possible period covered by this data source: 2005–2018. We use the initial pension income (PI) level as our single indicator of the SE status of the retired population. Methods The mortality gradient by income is quantified in two ways: via an indicator referred to as “rela…
Evaluación de las tarifas de las pensiones de accidentes de trabajo y enfermedades profesionales (2011-2015)
Este trabajo analiza si las tarifas que se aplican para la determinación del denominado capital coste de pensiones derivadas de los accidentes de trabajo y enfermedades profesionales son las adecuadas. A partir de los datos de la Muestra Continua de Vidas Laborales y de la evolución de la longevidad de la población general en España, se estiman tablas de mortalidad para las contingencias de viudedad e invalidez que, combinadas con los parámetros económicos y financieros apropiados, permiten construir las bases técnicas actuarialmente justas para cada uno de los años objeto de análisis. Los resultados obtenidos sugieren que las tarifas aplicadas en el periodo 2011- 2014 han sido muy superior…
Models of the Actuarial Balance of the Pay-As-You-Go Pension System: A Review and Some Policy Recommendations
This paper reviews the two main methods used by government Social Security departments to draw up the socalled actuarial balance of the p ayasyougo pension system, focusing especially on results, methodology and actuarial issues. The specific models studied are those in the United States, Japan and Sweden, and their main differences and similarities are highlighted. The authors make some specific policy recommendations that would be of interest to public finance economists, social security actuaries and policy makers, and they suggest that international organizations (ISSA, the World Bank, the OECD and others interested in public pension reform) could be supportive in developing and enforci…
Subjective Economic Risk to Beneficiaries in Notional Defined Contribution Accounts
ABSTRACT This article aims to quantify the aggregate subjective economic risk to which beneficiaries would be exposed if a retirement pension system based on notional account philosophy were introduced. We use scenario generation techniques to make projections of the factors that determine the real expected internal rate of return (IRR) and the expected replacement rate (RR) for the beneficiary according to six retirement formulae based on the most widely accepted rates or indices. We then apply the model to the case of Spain. Our projections are based on Herce and Alonso's macroeconomic scenario 2000-2050 (2000) and include information about the past performance of the indices and the time…
Un Procedimiento De Selecciin De Sub-Muestras De Gran Tamaao De Una Muestra Aleatoria Simple Representativas De La Poblaciin De Estudio (A Selection Procedure of High Size Sub-Samples from a Simple Random Sample Representative of the Population)
Spanish Abstract: En este trabajo se propone una metodologia basada en la optimizacion para elegir sub-muestras de gran tamano extraidas de una muestra aleatoria simple inicial que mejore la representatividad de la poblacion objeto de estudio. El criterio se basa en maximizar el tamano de la sub-muestra a traves de la constante de proporcionalidad de un muestreo estratificado con afijacion proporcional sujeto a que el p-valor del test de bondad del ajuste tome valores suficientemente altos, dejando al usuario la posibilidad de elegir la relacion deseada entre la calidad del ajuste y el tamano de la sub-muestra. Para ilustrar el procedimiento propuesto se realiza una aplicacion a la Muestra …