Benefit Adequacy in Funded Pension Systems:  Micro-Simulation of the Israeli Pension Scheme

Wolf, Ishay; Lorena,

doi:10.35808/ijeba/694

Cited by 7 publications

(3 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The individual is not capable of managing inherent market failures/risks or of transferring them to the government's responsibility. The success of the Israeli pension system as a radical DC scheme is partially because of high American influence and sophisticated capital markets for many years (Wolf and Caridad 2021b).…”

Section: The First Order: Substantial Risk-sharing By Market Designmentioning

confidence: 99%

“…The consequences of the current pandemic crisis on the trust of participants have yet to be discovered. The increased role of supplementary pension funds and the recent economic and financial downturn have led to new challenges in relation both to future financial sustainability and to the adequacy of pension benefits (Wolf and Caridad 2021b). In the course of the COVID-19 pandemic crisis, governments around the world have come up with ambitious plans for encouraging market activities and transferring social payments to the poor.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Binary Path of Risks in Pension Systems and Political Pressure

Wolf¹

2021

WRPE

Self Cite

View full text Add to dashboard Cite

In this paper, we offer an explanation for cyclical reforms to pension systems, based on the experience of countries in Central and Eastern Europe (CEE) over the last three decades. We conclude that in making the transition to funded pension design, governments not only transfer longevity and fiscal risks to the individual but also absorb risks transferred from the public, with each market actor transferring undiversifiable risks to the other. This pathway of hidden risks, which has not previously been discussed in the literature, stems from a public expectation that citizens will enjoy risk premiums and adequate old-age benefits, an expectation that evolves into political pressure. The outcomes of this risk path are realized in financial transfers, such as means-tested social security and minimum pension guarantees. Consequently, funded pension designs converge naturally into a new landscape paradigm of risk-sharing, with intergenerational and intragenerational components. Financial crises such as the one accompanying the recent COVID-19 pandemic foster the convergence process.

show abstract

Section: The First Order: Substantial Risk-sharing By Market Designmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Binary Path of Risks in Pension Systems and Political Pressure

Wolf¹

2021

WRPE

Self Cite

View full text Add to dashboard Cite

show abstract

“…Nowadays, after the Covid-19 pandemic crisis and governmental bailout waves, one must wonder what the government's share in stabilizing the markets is. In addition, the public must re-consider the trust in the capability of financial markets to providing adequate benefits in old age (Wolf & Caridad, 2021c).…”

Section: Introductionmentioning

confidence: 99%

The Expectation for Pension Insurance in Funded Schemes: Theoretical Model and Global Implementation

Wolf

Río

2021

Acad. J. Interdiscip. Stud.

Self Cite

View full text Add to dashboard Cite

In this study, we derive the financial position of pension actors in the market during pension system transition toward more funded capitalized scheme, mainly via an option benefit model. This is enabled by not considering the economy as a single earning cohort. We analytically demonstrate a socio-economic anomaly in funded pension system, which is in favor of high earning cohorts on the expense of low earning cohorts. This anomaly is realized by lack of insurance and exposure to financial and systemic risks. Furthermore, the anomaly might lead to pension re-reform back to unfunded scheme, mostly due to political pressure. We find that minimum pension guarantee is a rebalance mechanism to this anomaly, which increases the probability to sustainable pension scheme. Specifically, we argue that implementing the guarantee with an intra-generational, risk-sharing mechanism is the most efficient way to reduce the effect of this abnormality. Moreover, we exhibit the convergence process toward implementing minimum pension guarantee in many countries, which have capitalized their pension systems during the last three decades, particularly among Latin America and Central East Europe (CEE) countries. Received: 11 December 2020 / Accepted: 5 August 2021 / Published: 5 September 2021

show abstract

Studying the equilibrium of pension designs when shifting to funded pension schemes: economic theory and links to political factors

Wolf

2022

SN Bus Econ

Self Cite

View full text Add to dashboard Cite

In this paper, we explain the evolution of pension systems due to political pressure. Such pressure has led to pension reversals in recent years in many of the countries of Central East Europe (CEE) and Latin America. We base our theory on exchange options and finance positions. We show that during the transition to a funded pension scheme, high earners benefit from the change, while the low earners' position worsens. This type of unstable position will eventually lead to pension reversals. We suggest the minimum pension guarantee as a mechanism to create a financial equilibrium to stabilize the pension market. Based on the option characteristics, we analyse the boundaries of that equilibrium. We find that high-income inequality and poverty foster the convergence to a mixed pension scheme or the implementation of a minimum pension guarantee. In the second part of this paper, we show how the minimum pension guarantee has accounted for a major part of the pension designs across OECD countries. Funded schemes that did not implement an unfunded mechanism were reversed to put more weight on unfunded pillars. Supplementary Information The online version contains supplementary material available at 10.1007/s43546-022-00236-z.

show abstract

Benefit Adequacy in Funded Pension Systems: Micro-Simulation of the Israeli Pension Scheme

Cited by 7 publications

References 9 publications

The Binary Path of Risks in Pension Systems and Political Pressure

The Binary Path of Risks in Pension Systems and Political Pressure

The Expectation for Pension Insurance in Funded Schemes: Theoretical Model and Global Implementation

Studying the equilibrium of pension designs when shifting to funded pension schemes: economic theory and links to political factors

Contact Info

Product

Resources

About