scholarly journals Notional defined contribution pension scheme experience in Latvia some lessons

2014 ◽  
Vol 13 (4) ◽  
pp. 185
Author(s):  
Olga Rajevska ◽  
Feliciāna Rajevska
Keyword(s):  
Pension Scheme ◽  
Defined Contribution ◽  
Notional Defined Contribution

GUARANTEE VALUATION IN NOTIONAL DEFINED CONTRIBUTION PENSION SYSTEMS

2016 ◽  
Vol 46 (3) ◽  
pp. 677-707 ◽  
Author(s):  
Jennifer Alonso-García ◽  
Pierre Devolder
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Form Solution ◽  
Pension Scheme ◽  
Dependence Structure ◽  
Defined Contribution ◽  
Index Set ◽  
Notional Defined Contribution ◽  
Utility Indifference ◽  
Pension Adequacy

AbstractThe notional defined contribution pension scheme combines pay-as-you-go financing and a defined contribution pension formula. The return on contributions is based on an index set by law, such as the growth rate of GDP, average wages or contribution payments. The volatility of this return compromises the system's pension adequacy and therefore guarantees may be needed. Here, we provide a minimum return guarantee to the pension contributions. The price is calculated in a utility indifference framework. We obtain a closed-form solution for a general dependence structure with exponential preferences and in presence of stochastic short interest rates.

scholarly journals The transition to NDC in Italy: assessing distributive and financial effects

2021 ◽  
pp. 1-16
Author(s):  
Carlo Mazzaferro
Keyword(s):  
Net Present Value ◽  
Pension System ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Ratio Distribution ◽  
Actuarial Fairness ◽  
Notional Defined Contribution ◽  
High Level ◽  
Pension Benefits

Abstract Moving from a Defined Benefit (DB) to a Notional Defined Contribution (NDC) pension formula creates significant re-distributive effects. We estimate the amount and the intensity of these effects in the case of the Italian transition to NDC, which began in 1995. Based on administrative data of the main Italian pension scheme (FPLD), we study the evolution of yearly inequality within old-age pension benefits. Furthermore, we study the adequacy and the actuarial fairness of the pension system, by estimating the replacement rates and the Net Present Value Ratio distribution for workers who retired in the period 1996–2019. Our results show that the very generous interpretation of acquired rights determined by the 1995 reform has contributed to maintaining a high level of adequacy and a significant level of intergenerational imbalance. The financial costs of this imbalance are estimated and its extent is significant.

The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison

2018 ◽  
Vol 19 (4) ◽  
pp. 365-382 ◽  
Author(s):  
Vera Gurtovaya ◽  
Sergio Nisticò
Keyword(s):  
Pension System ◽  
Pension Scheme ◽  
Point System ◽  
Defined Contribution ◽  
Rates Of Return ◽  
System A ◽  
Analytical Properties ◽  
Notional Defined Contribution

AbstractThis paper examines the analytical properties of the German ‘points-based’ pension system. These properties are compared with those of a canonical Notional Defined Contribution (NDC) pension scheme. The paper identifies the circumstances under which the German ‘points-based’ system would mimic a Swedish-type NDC scheme and verifies to what extent the German ‘points-based’ scheme ensures uniformity of individual rates of return for some hypothetical careers. Finally, the paper proposes a set of new possible adjustment rules able to increase similarity between the German point system and the NDC scheme.

scholarly journals The impact of notional defined contribution system (NDC) from the point of view of individual

2014 ◽  
pp. 96-105
Author(s):  
Milda Švedienė ◽  
Astrida Slavickienė
Keyword(s):  
Interest Rate ◽  
Pension System ◽  
Labour Force ◽  
Point Of View ◽  
Pension Benefit ◽  
Pension Scheme ◽  
Retirement Age ◽  
Defined Contribution ◽  
Notional Defined Contribution ◽  
The Impact

Retirement benefit plans are the relevant theme in the world and in Lithuania as well. The demographic challenges such as ageing and shrinking labour force cause the problem which usual PAYG system is not able to solve. Whereas this problem is very important in Lithuania simulation of notional defined contribution system is suggested. The influence of new pension system to individuals is analysed in this paper.  The analysis of theoretical works showed that NDC system is defined contribution (DC) system financed as in pay-as-you-go (PAYG) system. This pension scheme is different from others because of it accounting mechanism: contributions of individuals are accumulated on their individual accounts but whereas real capital is not accumulated the balance is notional. All accumulated sum is converted to pension benefit when individuals are at retirement age depending on cohort’s life expectancy. It is said that NDC pension system helps to solve problems such as sensitivity to changes in economic growth, decreasing volume of savings or create a better link between contributions and benefits.  Nevertheless it is recognized that benefit return in NDC pension system is less than in usual defined contribution system. The results of simulation have showed that notional defined contribution system in Lithuania would not be the way out from problems in pension system. The system would be balanced in 30-year period and indexation would be acceptable for individuals but from 2040 interest rate would be reduced by the relevant part of the balance ratio. Depending on the changes in interest rate from 2040 notional capital would be less than all sum of contribution paid and it would negatively impact individuals’ finances. It was found that the more years individuals spend in labour market the bigger capital they accumulate and the bigger benefit get when they are at retirement age. Nevertheless it was noticed that replacement rate would be approximately 25 percent and it would not be adequate for the required use of retirees.

Should a Survivorship Dividend Be Included in Notional Defined Contribution Accounts (NDCs)?

2013 ◽  
Author(s):  
Carlos Vidal-Melii ◽  
Marra del Carmen Boado-Penas ◽  
Francisco Navarro-Cabo
Keyword(s):  
Defined Contribution ◽  
Notional Defined Contribution

The shift to the defined contribution pension scheme: an Italian case

2017 ◽  
Vol 9 (1) ◽  
pp. 72
Author(s):  
Massimo Angrisani ◽  
Giovanni Di Nella ◽  
Cinzia Di Palo
Keyword(s):  
Pension Scheme ◽  
Defined Contribution ◽  
Italian Case
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