Abstract
Pension providers are currently running into trouble mainly due to the ultra-low interest rates and the guarantees associated to some pension benefits. In this paper, we aim to reduce the pension volatility and provide adequate pension levels—with no guarantees—through a new pension design. Under this design, the individual's premium is split into an individual and a collective account, both invested in funds. When the return from the individual fund exceeds a predefined corridor, a certain number of units is transferred to or from the collective account. In this way, the volatility of the individual fund is smoothed. By controlling the corridor width, we maximize the total accumulated capital at retirement.
Original language | English |
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Pages (from-to) | 308-322 |
Number of pages | 15 |
Journal | Applied Stochastic Models in Business and Industry |
Volume | 38 |
Issue number | 2 |
Early online date | 19 Dec 2021 |
DOIs | |
Publication status | Published - Mar 2022 |
Keywords
- collective mechanism
- optimization
- pensions
- redistribution index
- volatility smoothing
ASJC Scopus subject areas
- Modelling and Simulation
- General Business,Management and Accounting
- Management Science and Operations Research