Generic NDC - Equilibrium, Valuation and Risk Sharing with and without NDC Bonds

Edward Palmer (edward.palmer@nek.uu.se)
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Edward Palmer: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

No 2011:3, Working Paper Series from Uppsala University, Department of Economics

Abstract: The Non-financial (Notional) Defined Contribution (NDC) PAYGO pension scheme is a recent innovation and its generic dimensions have not previously been explored in a coherent context. This paper does this. It derives and analyzes the demographic, economic and distributional properties of NDC. The residual (systematic) longevity risk creates a special problem, solved with an NDC bond, the asset that closes the system financially, transferring residual risk to the government (taxpayers). This guarantees a fixed NDC contribution rate and, thus, intergenerational commitment, with transparent distributional policy pursued through targeted transfers from general tax revenues and taxation of overall personal income.

Keywords: NDC; Notional Defined Contribution; Non-financial Defined Contribution; NDC Bond; Risk sharing; Pension Policy; Pay-as-you-go; PAYG (search for similar items in EconPapers)
JEL-codes: H55 I38 J14 O23 P16 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-02-04
New Economics Papers: this item is included in nep-age and nep-cis
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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