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Does the pension system’s income statement really matter? A proposal for an NDC scheme with disability and minimum pension benefits

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Garvey, Anne M. and Ventura-Marco, Manuel and Vidal-Meliá, Carlos (2019) Does the pension system’s income statement really matter? A proposal for an NDC scheme with disability and minimum pension benefits. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 22, 2019, ISSN: 2341-2356 ]

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Resumen (otros idiomas)

This paper develops a full accounting model for monitoring the solvency of a notional defined contribution (NDC) pension scheme with disability and minimum pension benefits. Using the annual report of the Swedish pension system as a benchmark (TSPS, 2018), we extend the “Swedish” actuarial balance developed by Pérez-Salamero et al. (2017) by adding an income statement which fully explains the reasons behind the changes in the system’s solvency by type of benefit. In line with the reference model, assets and liabilities are measured at present value at each reporting date, and changes in present value are reported in each period as income or expenses and are included on the income statement. Our proposed model is a step forward because it, also, incorporates the changes for disability pensions, the value of change in the discount rate and the explicit recognition of non-contributory rights (NCRs) into the Income statement. This accounting framework integrates both contributory and social aspects of public pensions and discloses the real cost of the disability contingency and the redistribution through minimum pensions. The paper contains a numerical example consisting of an income statement for a (fictional) already-functioning system to illustrate the main differences between the Swedish NDC scheme and our model. Mathematical details are presented in a comprehensive technical appendix.

Item Type:Working Paper or Technical Report
Palabras clave (otros idiomas):Disability Insurance; Fair Presentation; Minimum Pensions; Notional Defined Contribution; Pay-as-you-go; Pension Accounting; Retirement; Sweden; True and Fair view.
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Public economy
Social sciences > Economics > Insurance
JEL:G22, H55, H83, J26, M48
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2019
Number:22
ID Code:56340
Deposited On:15 Jul 2019 10:23
Last Modified:21 Oct 2019 11:22

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