Collective buffers in a new Dutch pension system with individual - - PowerPoint PPT Presentation

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Collective buffers in a new Dutch pension system with individual - - PowerPoint PPT Presentation

Feb 23, 2023 337 likes •559 views

Collective buffers in a new Dutch pension system with individual pension pots. The impact of the non-negative constraint E.M.N. de Beleir BSc. Supervisors: Anne G. Balter (UvT) Rick te Spenke (Deloitte) Second reader: prof. dr. B.J.M.

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SLIDE 1

Collective buffers in a new Dutch pension system with individual pension pots.

The impact of the non-negative constraint

E.M.N. de Beleir BSc. Supervisors: Anne G. Balter (UvT) Rick te Spenke (Deloitte) Second reader:

  • prof. dr. B.J.M. Werker (UvT)
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SLIDE 2

Dutch pension system

  • 3 pension pillars
  • First: AOW
  • Second: Occupational pension plan
  • Defined benefit (DB)
  • Defined contribution (DC)
  • “Doorsneesystematiek”
  • Third: private savings
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SLIDE 3

Pension reform

  • Abolisch “Doorsneesystematiek”
  • Government
  • Personal pension pots with positive buffer (based on IV-C-R)
  • FNV
  • If personal pension pots  positive/negative buffers
  • Since more Intergenerational Risk Sharing (IGR)
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SLIDE 4

Intergenerational Risk Sharing (IGR)

  • Risk wich can be shared between living generations
  • Micro longevity risk
  • Disability risk
  • Risk wich can be shared with future generations
  • Macro longevity risk
  • Stock market risk
  • Inflation risk
  • Interest rate risk
  • Discontinuity risk
  • The risk that future generations are not willing to participate in a (pension) system.
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SLIDE 5

Personal pension wealth with collective risk sharing (IV-C-R)

Buffer

PPV

Premium Pension Benefits

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SLIDE 6

Personal pension wealth with collective risk sharing (IV-C-R)

Premium

Buffer

PPV

Pension Benefits

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SLIDE 7

Model assumptions

  • Pay premium between 25𝑢ℎ and 65𝑢ℎ year
  • Receive pension benefit between 65^𝑢ℎ and 85𝑢ℎ year
  • Only stock market risk (no inflation, interest-rate, longevity etc.)
  • Black and Sholes financial market (normal distributed returns)
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SLIDE 8

Certain equivalent (CE)

Results

1. System with only positive buffers 2. System with both positive and negative buffers 3. System without a buffer

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SLIDE 9

Results

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SLIDE 10

Certain equivalent (CE)

Results

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SLIDE 11

Certain equivalent (CE)

Results

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SLIDE 12

Certain equivalent (CE)

Results

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SLIDE 13

Results

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SLIDE 14

Certain equivalent (CE)

Results

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SLIDE 15

Model adjustment: risk premium

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SLIDE 16

Model adjustment: risk premium

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Model adjustment: risk premium

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Model adjustment: risk premium

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Model adjustment: risk premium

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Discontinuity risk

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SLIDE 21

Conclusions

  • A buffer can be beneficial for everyone if
  • Negative buffers are allowed
  • A risk premium is provided
  • Future premiums are constant
  • Trade-off between discontinuity risk and welfare gains.