An ‘Eiopean’ Tool to Project Post Retirement Income in Portuguese Defined Contribution Pension Schemes

Frederico Pinheiro and Onofre Alves Simões

No 2023/0288, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Ageing of the populations is leading to reforms in Social Security systems with a negative impact on post retirement income. One way to minimize this is to reinforce the role of complementary pension schemes, and pension projections can be an important tool to assist workers in making their decisions on saving for retirement. The topic has been discussed by the European Union (EU) and the European Insurance and Occupational Pensions Authority (EIOPA). This work focuses on a tool for making pension projections in the scope of occupational defined contribution pension schemes, based on EIOPA’s guidance. We aim to study the potential performance of different investment strategies using an Economic Scenario Generator framework and evaluate the impact on the retirement income that such investment strategies produce, under different assumptions. The model underlying the tool takes in three main risk factors: the financial market risk, which includes uncertainty over returns on investments, inflation and interest rates; the labor risk, originated from uncertainty over real wage growth paths; the demographic risk, as a result of the increasing life expectancy.

Keywords: Retirement income; Pension projection; Economic scenario generator; Life tables; Real-world valuation; EIOPA (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-age and nep-ger
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