Automatic Adjustment Mechanisms in Public Pension Schemes to Address Population Ageing and Socioeconomic Disparities in Longevity

Keivan Diakite and Pierre Devolder (eugen.pircalabelu@uclouvain.be)
Additional contact information
Keivan Diakite: Université catholique de Louvain, LIDAM/ISBA, Belgium
Pierre Devolder: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2023022, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: Many pension systems require and continue to need change to maintain longterm financial sustainability. Most developed countries’ policy-makers have been pushed to reform their pension systems in order to preserve or re-establish financial sustainability. As longevity heterogeneity is frequently disregarded in the policy chosen, the pursuit of financial sustainability is done at the expense of intra-generational actuarial fairness. We propose a pension system management system based on two adaptation mechanisms: The first dynamic mechanism is integrated directly into the pension formula and corrects the heterogeneity of longevity when it exists between the agents of the pension scheme. A steering mechanism for both the contribution rate and the mean benefit ratio respects Musgrave’s rule, which makes it possible to distribute the demographic risk between working people and retirees. In order to capture both effects and incorporate a mortality component into the pension formula, we model longevity heterogeneity and ageing in a pension based on historical data.

Keywords: Automatic Adjustment Mechanisms; Longevity heterogeneity; Musgrave; pay-as-you-go; Pension design (search for similar items in EconPapers)
Pages: 41
Date: 2023-05-31
New Economics Papers: this item is included in nep-age
References: Add references at CitEc
Citations:

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:2023022

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).