Optimal strategies for pay-as-you-go pension finance: A sustainability framework

Optimal strategies for pay-as-you-go pension finance: A sustainability framework

The aim of this paper is to design an automatic balancing mechanism to restore the sustainability of a pay-as-you-go (PAYG) pension system based on changes in its main variables, such as the contribution rate, normal retirement age and indexation of pensions. Using nonlinear optimisation, this mecha...

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Veröffentlicht in:Insurance, mathematics & economics mathematics & economics, 2016-07, Vol.69, p.117-126
Hauptverfasser: Godínez-Olivares, Humberto, Boado-Penas, María del Carmen, Haberman, Steven
Format: Artikel
Sprache:eng
Schlagworte:
Design optimization
Employer contributions
Optimisation
Pay-as-you-go
Pension plans
Public pensions
Risk
Studies
Sustainability
Wages & salaries
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Beschreibung
Zusammenfassung:The aim of this paper is to design an automatic balancing mechanism to restore the sustainability of a pay-as-you-go (PAYG) pension system based on changes in its main variables, such as the contribution rate, normal retirement age and indexation of pensions. Using nonlinear optimisation, this mechanism, identifies and applies an optimal path of these variables to a PAYG system in the long run and absorbs fluctuations in longevity, fertility rates, salary growth or any other events in a pension system.
ISSN:0167-6687
1873-5959
DOI:10.1016/j.insmatheco.2016.05.001