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RESEARCH PRODUCT
Notional defined contribution pension schemes: Why does only Sweden distribute the survivor dividend?
Carlos Vidal-meliáFrancisco Navarro-caboMaría Del Carmen Boado-penassubject
PensionLegacy costsActuarial sciencePensions de jubilacióLongevity risk05 social sciencesInternal rate of return0506 political scienceAnnual percentage rate0502 economics and business050602 political science & public administrationEconomicsDividend050207 economicsBusiness and International ManagementNotional amountGeneral Economics Econometrics and FinanceRetirement agedescription
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 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.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-01-01 |