Structural Reforms for Public Pension Schemes - Part II
Traditionally, public pension schemes managed by social security organizations are financed by a PAYG (pay as you go) mechanism and use a Defined Benefit logic. This double characteristic (PAYG + DB) has been massively challenged these last decades in the well-known context of ageing. The demographic evolution will impact directly the PAYG scheme and the DB nature, protecting by definition the benefits, generates an unavoidable increasing of the contributions. In order to address this financial threat, different countries have introduced or proposed various strategies of reforms, including structural reforms. Among the main alternatives to classical schemes, we can think of the NDC system (Notional Defined Contribution), the point system or individual saving accounts. The introduction of these new mechanisms has been mainly motivated by financial sustainability arguments. But other constraints or goals of a public system must not be forgotten. In particular, the following issues motivate deep actuarial analysis:
- equilibrium between financial sustainability and social adequacy;
- intergenerational risk sharing;
- actuarial neutrality in case of early retirement;
- longevity heterogeneity driven by socio economic conditions.
This is part 2 of a two-day webinar.