An Actuarial Balance Sheet Model for Defined Benefit Pay-As-You-Go Pension Systems with Disability and Retirement Contingencies

Astin Bulletin, 44 (2), 367-415. DOI: 10.1017/asb.2014.5, Published online: 13 February 2014

45 Pages Posted: 22 May 2012 Last revised: 4 Sep 2015

See all articles by Manuel Ventura-Marco

Manuel Ventura-Marco

University of Valencia - Faculty of Economics

Carlos Vidal-Meliá

University of Valencia - Department of Financial Economics

Date Written: December 23, 2013

Abstract

In this paper we develop a theoretical basis for drawing up a “Swedish” type actuarial balance sheet for a defined benefit pay-as-you-go (DB PAYG) scheme with retirement and disability benefits. Our model enables us to obtain the system's expected average turnover duration, measure the scheme's solvency and explore the phenomenon identified as “pension reclassification”, a widespread practice that masks the system's real status unless further pension information becomes available. The model is clearly linked to actuarial practice in social security and gives partial support to the practical adaptation of Swedish methodology carried out by OSFI (2012) in applying the concept of the contribution asset to the Canadian Pension Plan (CPP) balance sheet, which includes disability and survivor benefits.

Keywords: Actuarial Balance, Disability, Retirement, Solvency, Sweden, Transparency

JEL Classification: H55, H83, J26, M49

Suggested Citation

Ventura-Marco, Manuel and Vidal-Meliá, Carlos, An Actuarial Balance Sheet Model for Defined Benefit Pay-As-You-Go Pension Systems with Disability and Retirement Contingencies (December 23, 2013). Astin Bulletin, 44 (2), 367-415. DOI: 10.1017/asb.2014.5, Published online: 13 February 2014, Available at SSRN: https://ssrn.com/abstract=2064502 or http://dx.doi.org/10.2139/ssrn.2064502

Manuel Ventura-Marco

University of Valencia - Faculty of Economics ( email )

Valencia, E-46022
Spain

Carlos Vidal-Meliá (Contact Author)

University of Valencia - Department of Financial Economics ( email )

Avda. del Tarongers, s/n
46022 Valencia
Spain

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