Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes
This paper reviews the factors that should guide the design of private funded pensions to create a complete pension system alongside a notional defined contribution—or public—component. It argues that a mix of public and private pensions is the mos...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/238221525096188495/Designing-pension-systems-with-coherent-funded-private-pillars-including-issues-for-notional-defined-contribution-schemes http://hdl.handle.net/10986/29757 |
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okr-10986-297572021-06-08T14:42:46Z Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes Price, William PENSION FUNDS DEFINED CONTRIBUTION PRIVATE PENSION BENEFIT FORMULA PENSIONS RETIREMENT INCOME FORECASTING SIMULATIONS STOCK MARKET BOND MARKET GOVERNMENT BONDS EQUITY MARKETS ANNUITIES This paper reviews the factors that should guide the design of private funded pensions to create a complete pension system alongside a notional defined contribution—or public—component. It argues that a mix of public and private pensions is the most effective option to deliver the best combination of pension outcomes. Pension design should start with a vision for five core outcomes: coverage, adequacy, sustainability, efficiency, and security. Thinking through these outcomes helps guide choices for market structure, benefit type, contributions, investment strategy, and other factors. As well as technical design, the governance, scale, and expertise of pension funds are critical for good investment and other outcomes. Regulators and supervisors should also focus on these outcomes and then work out how best to mitigate the risks to achieving them over time. These issues are relevant in relation to any public pillar, but notional defined contribution (NDC) systems bring clarity and transparency to policy makers in the benefit formula. The NDC payout formula can offer insights for how to improve the payout options in funded pillars. The clarity on the NDC formula also means that the joint distribution of public and private pensions can be modeled. This is important because the precise NDC formula may have implications for optimal investment strategies for private pensions, given, for example, the negative correlation between real per capita GDP growth and equity market returns over long periods. 2018-04-30T15:48:22Z 2018-04-30T15:48:22Z 2018-04 Working Paper http://documents.worldbank.org/curated/en/238221525096188495/Designing-pension-systems-with-coherent-funded-private-pillars-including-issues-for-notional-defined-contribution-schemes http://hdl.handle.net/10986/29757 English Policy Research Working Paper;No. 8420 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
PENSION FUNDS DEFINED CONTRIBUTION PRIVATE PENSION BENEFIT FORMULA PENSIONS RETIREMENT INCOME FORECASTING SIMULATIONS STOCK MARKET BOND MARKET GOVERNMENT BONDS EQUITY MARKETS ANNUITIES |
| spellingShingle |
PENSION FUNDS DEFINED CONTRIBUTION PRIVATE PENSION BENEFIT FORMULA PENSIONS RETIREMENT INCOME FORECASTING SIMULATIONS STOCK MARKET BOND MARKET GOVERNMENT BONDS EQUITY MARKETS ANNUITIES Price, William Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| relation |
Policy Research Working Paper;No. 8420 |
| description |
This paper reviews the factors that
should guide the design of private funded pensions to create
a complete pension system alongside a notional defined
contribution—or public—component. It argues that a mix of
public and private pensions is the most effective option to
deliver the best combination of pension outcomes. Pension
design should start with a vision for five core outcomes:
coverage, adequacy, sustainability, efficiency, and
security. Thinking through these outcomes helps guide
choices for market structure, benefit type, contributions,
investment strategy, and other factors. As well as technical
design, the governance, scale, and expertise of pension
funds are critical for good investment and other outcomes.
Regulators and supervisors should also focus on these
outcomes and then work out how best to mitigate the risks to
achieving them over time. These issues are relevant in
relation to any public pillar, but notional defined
contribution (NDC) systems bring clarity and transparency to
policy makers in the benefit formula. The NDC payout formula
can offer insights for how to improve the payout options in
funded pillars. The clarity on the NDC formula also means
that the joint distribution of public and private pensions
can be modeled. This is important because the precise NDC
formula may have implications for optimal investment
strategies for private pensions, given, for example, the
negative correlation between real per capita GDP growth and
equity market returns over long periods. |
| format |
Working Paper |
| author |
Price, William |
| author_facet |
Price, William |
| author_sort |
Price, William |
| title |
Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| title_short |
Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| title_full |
Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| title_fullStr |
Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| title_full_unstemmed |
Designing Pension Systems with Coherent Funded Private Pillars Including Issues for Notional Defined Contribution Schemes |
| title_sort |
designing pension systems with coherent funded private pillars including issues for notional defined contribution schemes |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/238221525096188495/Designing-pension-systems-with-coherent-funded-private-pillars-including-issues-for-notional-defined-contribution-schemes http://hdl.handle.net/10986/29757 |
| _version_ |
1764470180649369600 |