Social security and trust fund management

Oshio, Takashi

doi:10.1016/j.jjie.2004.08.002

Cited by 3 publications

(2 citation statements)

References 13 publications

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“…Academics and practitioners agreed that the long-run sustainability of the pension system must come with a reform of the existing system to close the budget gap. It is still debatable whether reformation policies like an increasing the social security taxation cap (Kitao (2014)) or investment capacity (Bohn (1999), Oshio (2004)) would yield superior sustainability benefit for the fund. Our work also tries to provide a unifying theory between choices of reformation schemes; increasing the social security taxation cap or investment capacity.…”

Section: The Objective Of This Workmentioning

confidence: 99%

“…Bohn (1999) also find that stock returns are positively correlated with social security's wage-indexed benefit obligations, equity investments would also help to stabilize the payroll tax. Oshio (2004) suggested that a trust fund in some form can offset the negative income effect of a PAYGO system. Social security trust fund is considered to be a "buffer," which is expected to absorb the adverse impact of a declining population and demographic shocks.…”

Section: Social Security System and Its Sustainabilitymentioning

confidence: 99%

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Plan member?s heterogeneity, economic regime effect and their implication on the management and sustainability of retirement funds

Danswasvong

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This research studies the importance of plan members? heterogeneity to the management of defined benefit (DB) pension fund. We propose a new multi-member model of DB pension fund that allows for heterogeneity in plan members? retirement ages, salary growths, and other characteristics. We first solve analytically for optimal management strategy and show that the sponsor?s supplementary contribution and the fund?s allocation in risky assets are determined by the cross-product between the fund?s expected retirement liabilities and some heterogeneity-adjusted discount factors. We then demonstrate that the presence of heterogeneity can have a significant influence on the optimal management strategy and that a management decision made while ignoring heterogeneity will be suboptimal. However, solving for the true optimality decision under multi-member setting requires high computational resources, which is exponentially increasing with the number of members. We suggest a way to reduce dimensionality by approximating the multi-member problem with a series of single-member (adaptive representative agent or ARA) problems. Our ARA is the weighted average of all the remaining plan members. Higher weight is given to plan member with higher heterogeneity-adjusted expected benefit liability. Compared to the simple average approach, our novel approach is shown to be better especially under unfavorable market conditions. Lastly, we looked at the effect of heterogeneity on a country-level scale and try to understand its effects on the sustainability of a country?s social security system. In our model, we argue that population heterogeneity is the key in unifying competing theories on strategic reforms and their effects on sustainability. Different aspects of heterogeneity have characteristically different effects to the system?s aggregate taxation credit and investment return and thus the system?s lifetime estimate.

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Section: The Objective Of This Workmentioning

confidence: 99%

Section: Social Security System and Its Sustainabilitymentioning

confidence: 99%

Plan member?s heterogeneity, economic regime effect and their implication on the management and sustainability of retirement funds

Danswasvong

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A mixed blessing of lifespan heterogeneity

Gahramanov

Tang

2013

Journal of the Japanese and International Economies

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Managing public investment funds: best practices and new questions

Mitchell

Piggott²,

Kumru

2008

Journal of Pension Economics and Finance

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Large publicly-held pools of assets are playing an increasingly prominent role in the global investment arena. We compare three distinct forms of such public funds, namely foreign exchange reserve funds, sovereign wealth funds, and public pension funds, to highlight their differences and similarities. We review previous studies on ways to better secure prudent and economically sound public fund management practices in these funds, as well as how to evaluate their governance and investment policies and how to better protect the assets from political interference. Drawing from the pension and corporate finance literature, we also link their management to governance practices and country-specific characteristics, and contrast those with empirical findings on linkages with corporate governance.

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Social security and trust fund management

Abstract: In this paper

Cited by 3 publications

References 13 publications

Plan member?s heterogeneity, economic regime effect and their implication on the management and sustainability of retirement funds

Plan member?s heterogeneity, economic regime effect and their implication on the management and sustainability of retirement funds

A mixed blessing of lifespan heterogeneity

Managing public investment funds: best practices and new questions

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