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Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits

Carlos Vidal-Melia (), Manuel Ventura-Marco () and Juan Manuel Pérez-Salamero González ()
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Manuel Ventura-Marco: Department of Financial Economics and Actuarial Science, University of Valencia, 46010 Valencia, Spain
Juan Manuel Pérez-Salamero González: Department of Financial Economics and Actuarial Science, University of Valencia, 46010 Valencia, Spain

Sustainability, 2018, vol. 10, issue 8, 1-36

Abstract: This paper develops a social insurance accounting model for a notional defined contribution (NDC) scheme combining retirement and long-term care (LTC) contingencies. The procedure relies on standard double-entry bookkeeping and enables us to compile a “Swedish” type actuarial balance sheet (ABS) following a framework equivalent to an open group approach. This methodology is suitable for reporting the system’s solvency status and can show periodical changes in the system’s financial position by means of an income statement. The information underpinning the actuarial valuation is based on events and transactions that are verifiable at the valuation date, without considering expected future trends. The paper also contains an illustrative example to make it easier for policymakers to understand the main advantages and difficulties of our proposal. The policy conclusions stress the need to properly report social insurance benefits to enhance transparency and sustainability and to improve decision-making because it is in the public interest to do so.

Keywords: life care annuities; long-term care insurance; notional defined contribution; pay-as-you-go; pension accounting; retirement; social security; sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
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