Delay, feedback and variability of pension contributions and fund levels

Zimbidis, Alexandros A.; Haberman, Steven

doi:10.1016/0167-6687(93)90408-h

Cited by 19 publications

(15 citation statements)

References 3 publications

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“…0. The use ofx s instead of x s is critically important since it allows to utilize the random finite difference approximation (20) for nonsmooth function (see details in [7]). Convergence of the sequence x s , s = 0,1,. .…”

Section: Optimization Proceduresmentioning

confidence: 99%

“…The goal of these models is to analyze reasonable (and secure) consumption of individuals. Definitely, the ability of workers to maintain appropriate consumption levels depends on demographic instability and uncertainties imposed by processes prevailing in the population, such as ''birth-and-death'' processes, migration, as well as on instabilities and uncertainties of the production processes [20]. For simple cases, as it is discussed in Section 2, Samuelson [18] and Aaron [1] showed that if the sum of the rates of growth of population and incomes exceeds the rate of returns on investments, then the consumption of pensioners can be maintained by the transfer of incomes from workers to pensioners.…”

Section: Introductionmentioning

confidence: 99%

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Simulation-based optimization of social security systems under uncertainty

Ermolieva¹

2005

European Journal of Operational Research

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Section: Optimization Proceduresmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Simulation-based optimization of social security systems under uncertainty

Ermolieva¹

2005

European Journal of Operational Research

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“…Now, if M> 1, (HABERMAN and ZIMBIDIS (1993) show that these inequalities hold for higher values of q). This result is intuitive: the introduction of a one year time delay means that we have lost information about the fund since time t -1 and we would expect the resulting variances to be increased.…”

Section: K* Ymentioning

confidence: 99%

“…feed back into changes in C(.). Other values of q are considered in detail in ZIMBIDIS and HABERMAN (1993) and are not discussed here.…”

Section: Q = 0 Corresponds To T H E Analysis Of D U F R E S N E (1988mentioning

confidence: 99%

Pension Funding With Time Delays and the Optimal Spread Period

Haberman

1995

ASTIN Bull.

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The paper extends earlier results by demonstrating that there is an optimal range of values for the period for amortizing valuation surpluses or deficiencies, in the case when there is a one year time delay between fixing a contribution rate and the accounting information about current fund levels. The optimal range is compared for the cases where there is no time delay and there is a one year time delay.

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“…However, if ALT and Q (the total value of annual salaries currently paid to active members) are fixed, it is more convenient to work with the mean and variance of the contribution rate and the funding ratio. A series of papers have developed and elaborated this ap-proach: Bédard (1999), Booth, Chadburn, Cooper, Haberman & James (1999), Cairns (1995Cairns ( , 1996aCairns ( , 2000, Cairns and Parker (1997), Chang and Chen (2002), Gerrard and Haberman (1996), Haberman (1990bHaberman ( , 1992Haberman ( , 1993aHaberman ( , 1993bHaberman ( , 1994aHaberman ( , 1994bHaberman ( , 1995Haberman ( , 1997aHaberman ( , 1997bHaberman ( , 1998 Mandl and Mazurová (1996), Haberman (1999, 2000) and Zimbidis and Haberman (1993).…”

Section: Transformation Of the Portfolio Returns To Contribution Ratementioning

confidence: 99%

Joined-Up Pensions Policy in the UK: An Asset-Liability Model for Simultaneously Determining the Asset Allocation and Contribution Rate

Board

Sutcliffe

2005

SSRN Journal

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ABSTRACT:The trustees of funded defined benefit pension schemes must make two vital and interrelated decisions -setting the asset allocation and the contribution rate. While these decisions are usually taken separately, it is argued that they are intimately related and should be taken jointly. The objective of funded pension schemes is taken to be the minimization of both the mean and the variance of the contribution rate, where the asset allocation decision is designed to achieve this objective. This is done by splitting the problem into two main steps. First, the Markowitz mean-variance model is generalised to include three types of pension scheme liabilities (actives, deferreds and pensioners) In a funded defined benefit scheme the employer and employees both make contributions to a fund which is invested to provide the pension, and any other benefits due under the scheme. The benefits received under such schemes are defined in advance, usually as a proportion of the employee's final salary. Many UK companies have recently chosen to close their defined benefit pension schemes. In the 5½ years up to February 2003, 63% of UK final salary schemes were closed to new entrants, while an additional 9% of schemes were also closed to future accruals (Association of Consulting Actuaries, 2003). The reasons given for closure include the introduction of Financial Reporting Standard 17, the substantial deficits on final salary schemes (caused by the fall in interest rates, the major stock market decline after the peak in December 1999, the extended contribution holidays and contribution reductions for employers, increases in benefits, the conversion of discretionary benefits into non-discretionary benefits, the use of pension schemes to finance early retirement on very favourable terms, and the tax limit on scheme surpluses); the effective move from limited price indexation to fully indexed pensions, with the fall in annual increases in RPI to below 5% since July 1991; the regulatory burden of administering these schemes; the increased cost due to rising life expectancy; the increased size of pension liabilities, relative to the size of the employer; the increase in stock market volatility; the risks that such schemes impose on employers (e.g. the risk that the fund will be insufficient to pay the pensions, the credit rating of the employer may be reduced because of the possibility of pension shortfalls); the abolition of tax relief on dividends from UK companies in 1997; the changes in actuarial technique leading to more volatile surpluses; the risk that new legislation or decisions by the law courts will increase the liabilities; the lower priority given to retaining staff; the opportunity to establish defined contribution schemes with a lower cost to the employer, and the much greater portability of defined contribution schemes.This paper develops an approach to the simultaneous analysis of two critical and interrelated decisions which must be made by any fund's trustees: the fund's asset allocation and its contributio...

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Delay, feedback and variability of pension contributions and fund levels

Cited by 19 publications

References 3 publications

Simulation-based optimization of social security systems under uncertainty

Simulation-based optimization of social security systems under uncertainty

Pension Funding With Time Delays and the Optimal Spread Period

Joined-Up Pensions Policy in the UK: An Asset-Liability Model for Simultaneously Determining the Asset Allocation and Contribution Rate

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