An Actuarial Balance Sheet Model for Defined Benefit Pay-as-You-Go Pension Systems With Disability and Retirement Contingencies

Ventura-Marco, Manuel; Vidal‐Meliá, Carlos

doi:10.1017/asb.2014.5

Cited by 18 publications

(25 citation statements)

References 27 publications

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“…As mentioned above, this model can be considered as open group in any particular year t because it takes new entrants into account and assumes that there will be contributions to meet the liabilities, but the valuation formulas consider only pensioners and contributors at the valuation date. This particular conception of open group is used from a dynamic perspective, since the model enables us to draw up the ABS at any date t after the system reaches a mature state [31]. As we show below, estimating the value of the contribution flow (contribution asset) by multiplying it by the turnover duration (TD) is equivalent to discounting an assumed perpetual constant flow of contributions by the inverse of the TD.…”

Section: Accounting Principles For the Valuation Of Assets And Liabilmentioning

confidence: 99%

“…In line with the classic Swedish ABS [10], which basically aims to compute the value of the commitments to contributors and pensioners taken on by the system, rather than calculate how much the system would have to pay a third party if it was decided to contract out or transfer those commitments, the interest rate for discounting liabilities to pensioners is taken to be the growth rate of the covered wage bill (G). Several papers have used a discount rate tied to wage growth or overall economic growth [11,22,24,31,32,34,73].…”

Section: Accounting Principles For the Valuation Of Assets And Liabilmentioning

confidence: 99%

“…This paper builds on previous work carried out in the field of actuarial balances [11,[20][21][22][23][24][25][26][27][28][29][30][31][32][33]. All of these have dealt with the Swedish-type ABS, which has been compiled for various countries including Sweden [10,24,27,28], Spain [24,31], Japan [21], Canada [6,30], New Zealand [25], Germany [33] and Switzerland [11].…”

Section: Introductionmentioning

confidence: 99%

“…All of these have dealt with the Swedish-type ABS, which has been compiled for various countries including Sweden [10,24,27,28], Spain [24,31], Japan [21], Canada [6,30], New Zealand [25], Germany [33] and Switzerland [11].…”

Section: Introductionmentioning

confidence: 99%

“…However, the theoretical basis for carrying out the adaptation was not developed in their papers. Finally, the paper by Ventura-Marco and Vidal-Meliá [31] developed a theoretical basis for compiling a Swedish ABS for a DB PAYG scheme with retirement and disability benefits.…”

Section: Introductionmentioning

confidence: 99%

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Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

2018

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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 trends. The paper also contains an illustrative example to make it easier for policymakers to understand the main advantages and difficulties of our proposal. The policy conclusions stress the need to properly report social insurance benefits to enhance transparency and sustainability and to improve decision-making because it is in the public interest to do so.

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Section: Accounting Principles For the Valuation Of Assets And Liabilmentioning

confidence: 99%

Section: Accounting Principles For the Valuation Of Assets And Liabilmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

2018

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Financial sustainability and automatic balance mechanisms for NDC pension systems with disability benefits

Levantesi,

Menzietti,

Fratoni

2024

Ann Oper Res

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The need for Long term care (LTC) service continues to rise due to the increasing number of elderly in the world, which stresses the healthcare systems. As most of the LTC recipients are over age 65, several authors studied retirement products combining a lifetime annuity with a long-term care benefit (typical examples are Enhanced Pension and Life Care Annuity). The development of an integrated strategy may help to address the issue of the cost of care for pensioners affected by disability. In this paper, we contribute to the debate on the introduction of LTC benefits into a notional defined contribution (NDC) pension system by using a multivariate stochastic model to represent the future evolution of transition probabilities and economic variables, which allows investigation of the financial sustainability of the system in a stochastic environment. The presence of LTC adds new risk elements, such as the uncertainty related to disability rates and mortality rates of the disabled, which may jeopardize the financial equilibrium of the integrated system. To restore the system’s equilibrium, we apply two types of automatic balance mechanisms (ABM), one based on the solvency ratio, and the other on the liquidity ratio. Both act on the indexation of pensions and the notional rate.

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Life Care Annuities (Lca) Embedded in a Notional Defined Contribution (Ndc) Framework

Pla-Porcel¹,

Ventura-Marco²,

Vidal‐Meliá

2016

ASTIN Bull.

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This 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 discourage politicians from making promises about future LTC benefits without the necessary funding support.

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An Actuarial Balance Sheet Model for Defined Benefit Pay-as-You-Go Pension Systems With Disability and Retirement Contingencies

Cited by 18 publications

References 27 publications

Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

Financial sustainability and automatic balance mechanisms for NDC pension systems with disability benefits

Life Care Annuities (Lca) Embedded in a Notional Defined Contribution (Ndc) Framework

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