Stochastic Modellization of Hybrid Public Pension Plans (PAYG) under Demographic Risks with Application to the Belgian Case

Hassana Al-Hassan and Pierre Devolder
Additional contact information
Hassana Al-Hassan: Univerisity of Mines and Technology
Pierre Devolder: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2022042, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: Aging is an important challenge for pension schemes, especially for social security plans mainly 􏰂nanced by PAYG (Pay as you go) and based on a DB formula (De􏰂ned Bene􏰂t). In particular, demographic risks induce important increases of the contributions and threaten the 􏰂nancial sustainability of such schemes. On the other hand, switching to De􏰂ned Contribution plans can be a solution in terms of funding but introduce signi􏰂cant risks in terms of social adequacy. The purpose of this paper is to study hybrid solutions between DB and DC in a stochastic environment. In particular, we simulate for various risk sharing strategies, the evolution of contributions and bene􏰂ts by introducing risk factors in􏰃uencing the demographic dependence ratio (fertility, longevity, baby boom). We study the mean evolution of these processes as well as their value at risk.

Keywords: PAYG Pensions; Dependency Ratio; Musgrave; Convex Combination; Value at Risk (search for similar items in EconPapers)
Pages: 34
Date: 2022-12-20
New Economics Papers: this item is included in nep-age and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://dial.uclouvain.be/pr/boreal/en/object/bore ... tastream/PDF_01/view (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvad:2022042

Access Statistics for this paper

More papers in LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA) Voie du Roman Pays 20, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Nadja Peiffer (nadja.peiffer@uclouvain.be).