Abstract
This paper studies the financial sustainability of a pay-as-you-go pension fund within a stochastic framework. To this aim, a set of risk indicators of the solvency of the fund are also constructed. Financial and demographic risks are analyzed by investigating and comparing their impact on the evolution of the fund. Numerical results are approached by means of a simulation methodology, on the Italian pension funds.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
IPS55 are projected life tables for Italian males and females, cohort 1955.
- 2.
Pension funds of Italian Professional Orders are fed by two types of contributions: the first, called subjective, is calculated applying to the professional annual income a contribution rate which varies electively between 10% and 17%, with the obligation to pay a minimum annual contribution. In 2005 the average rate was 10.71%. The second type of contribution, called integrative, is calculated applying to the total amount of professional annual sales, subjected to VAT, a rate of 2%.
- 3.
The transformation coefficient is the annuitization coefficient used for the conversion into annuity of the notional contribution amount accumulated by each worker. For an exhaustive explanation of the argument we refer to [4].
References
Angrisani, M.: The logical sustainability of the pension system, Pure Math. and Appl. 19(1), 67–81 (2008)
Baldacci, E., Tuzi, D.: Demographic Trends and Pension System in Italy: an Assessment of 1990s Reforms, Labour 17, 209–240 (2003)
Davis, E.: Pension Funds, Oxford University Press (1995)
Janssen, J., Manca, R.: Notional Defined Contribution Pension Method and the Construction of Annuitization Coefficients. Proc. ICA 2006, Paris (2006)
Melis, R., Trudda, A.: Demographic risk indicators in pay-as-you-go pension funds, Probl. and Perspectives in Manag. 8(4), 117–126 (2010)
Orlando, A., Trudda, A.: Some remarks on First and second order stochastic processes choice, Invest. Manag. and Finan. Innov. 2004/3, 118–131 (2004)
Settergren, O.: The Automatic Balance Mechanism of the Swedish Pension System — A Non-technical Introduction. Wirtschaftspolitishe Blätter 4/2001, 339–349 (2001)
Trudda, A.: Casse di previdenza: analisi delle dinamiche attuariali, 2nd ed., Giappichelli, Torino (2008)
Van Gaalen, R.: Pension Funds, funding index, mismatch risk premium and volatility. 14th Afir Coll. (2004)
Vasicek, OA.: An equilibrium characterization of the term structure, J. of Finan. Econ. 5(2), 177–188 (1977)
Vidal, C., Boado, M., Settergren, O.: Automatic Balance Mechanism in Pay-As-You-Go Pension System, The Geneva Pap. 34(2), 287–317 (2009)
Acknowledgements
The authors acknowledge the financial support provided by the Banco di Sardegna Foundation (prot. 1637/2009.0377). Roberta Melis acknowledges the financial support provided by the Regione Autonoma della Sardegna (L.R. 7/2007).
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2012 Springer-Verlag Italia
About this chapter
Cite this chapter
Melis, R., Trudda, A. (2012). Financial and demographic risks impact on a pay-as-you-go pension fund. In: Perna, C., Sibillo, M. (eds) Mathematical and Statistical Methods for Actuarial Sciences and Finance. Springer, Milano. https://doi.org/10.1007/978-88-470-2342-0_36
Download citation
DOI: https://doi.org/10.1007/978-88-470-2342-0_36
Publisher Name: Springer, Milano
Print ISBN: 978-88-470-2341-3
Online ISBN: 978-88-470-2342-0
eBook Packages: Mathematics and StatisticsMathematics and Statistics (R0)