Optimal strategies for pay-as-you-go pension finance: A sustainability framework

Humberto Godínez-Olivares*, María del Carmen Boado-Penas, Steven Haberman

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Citations (Scopus)

Abstract

The aim of this paper is to design an automatic balancing mechanism to restore the sustainability of a pay-as-you-go (PAYG) pension system based on changes in its main variables, such as the contribution rate, normal retirement age and indexation of pensions. Using nonlinear optimisation, this mechanism, identifies and applies an optimal path of these variables to a PAYG system in the long run and absorbs fluctuations in longevity, fertility rates, salary growth or any other events in a pension system.

Original languageEnglish
Pages (from-to)117-126
Number of pages10
JournalInsurance: Mathematics and Economics
Volume69
DOIs
Publication statusPublished - Jul 2016

Keywords

  • Optimisation
  • Pay-as-you-go
  • Public pensions
  • Risk
  • Sustainability

ASJC Scopus subject areas

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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