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

Godínez-Olivares, H., Boado-Penas, M. D. C. & Haberman, S. (2016). Optimal strategies for pay-as-you-go pension finance: A sustainability framework. Insurance: Mathematics and Economics, 69, pp. 117-126. doi: 10.1016/j.insmatheco.2016.05.001

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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.

Publication Type: Article
Additional Information: © 2016, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Optimisation; Pay-as-you-go; Public pensions; Risk; Sustainability
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/14887

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