Pension Risk Management eJournal最新文献

{"title":"Idiosyncratic Risk, Aggregate Risk, and the Welfare Effects of Social Security","authors":"Daniel Harenberg, A. Ludwig","doi":"10.1111/iere.12365","DOIUrl":"https://doi.org/10.1111/iere.12365","url":null,"abstract":"We ask whether a pay-as-you-go financed social security system is welfare improving in an economy with idiosyncratic productivity and aggregate business cycle risk. We show analytically that the whole welfare benefit from joint insurance against both risks is greater than the sum of benefits from insurance against the isolated risk components. One reason is the convexity of the welfare gain in total risk. The other reason is a direct risk interaction which amplifies the utility losses from consumption risk. We proceed with a quantitative evaluation of social security’s welfare effects. We find that introducing an unconditional minimum pension leads to substantial welfare gains in expectation, even net of the welfare losses from crowding out. About 60% of the welfare gains would be missing when simply summing up the isolated benefits.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"96 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117697453","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Reconsidering Revenue Sharing: Why Retirement Plan Sponsors Should Consider Breaking the Link between Investment and Plan Costs","authors":"Marc Fandetti","doi":"10.2139/SSRN.3091115","DOIUrl":"https://doi.org/10.2139/SSRN.3091115","url":null,"abstract":"Revenue sharing, the part (or “share”) of an investment manager’s expense that can be used to pay retirement plan costs, remains a common practice among defined contribution (DC) plan sponsors. This article looks at the reasons why revenue sharing arrangements should be reconsidered in light of increased legal scrutiny of the reasonableness of fees and the spirit of transparency motivating recently required disclosures to plan sponsors and participants.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124787218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Political Representation and Governance: Evidence from the Investment Decisions of Public Pension Funds","authors":"A. Andonov, Yael V. Hochberg, Joshua D. Rauh","doi":"10.2139/ssrn.2754820","DOIUrl":"https://doi.org/10.2139/ssrn.2754820","url":null,"abstract":"We examine how political representatives affect the governance of organizations. Our laboratory is public pension funds and their investments in the private equity asset class. Representation on pension fund boards by state officials or those appointed by them — often determined by statute decades past — is strongly and negatively related to the performance of private equity investments made by the fund. This underperformance is driven both by investment category allocation and by poor selection of managers within category. Funds whose boards have high fractions of members who were appointed by a state official or sit on the board by virtue of their government position (ex officio) invest more in real estate and funds of funds, explaining 20-30% of the performance differential. These pension funds also choose poorly within investment categories, overweighting investments in small funds, in-state funds, and in inexperienced GPs with few other investors. Lack of financial experience contributes to poor performance by boards with high fractions of other categories of board members, but does not explain the underperformance of boards heavily populated by state officials. Political contributions from the finance industry to elected state officials on pension fund boards are strongly and negatively related to performance, but do not fully explain the performance differential.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124078624","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Less-Expensive Valuation of Long Term Annuities Linked to Mortality, Cash and Equity","authors":"K. Fergusson, E. Platen","doi":"10.2139/ssrn.3067068","DOIUrl":"https://doi.org/10.2139/ssrn.3067068","url":null,"abstract":"This paper proposes a paradigm shift in the valuation of long term annuities, away from classical no-arbitrage valuation towards valuation under the real world probability measure. Furthermore, we apply this valuation method to two examples of annuity products, one having annual payments linked to a mortality index and the savings account and the other having annual payments linked to a mortality index and an equity index with a guarantee that is linked to the same mortality index and the savings account. Out-of-sample hedge simulations demonstrate the effectiveness of real world valuation. In contrast to risk neutral valuation, which is a form of relative valuation, the long term average excess return of the equity market comes into play. Instead of the savings account, the num'eraire portfolio is employed as the fundamental unit of value in the analysis. The num'eraire portfolio is the strictly positive, tradable portfolio that when used as benchmark makes all benchmarked nonnegative portfolios supermartingales. The benchmarked real world value of a benchmarked contingent claim equals its real world conditional expectation. This yields the minimal possible value for its hedgeable part and minimizes the fluctuations for its benchmarked hedge error. Under classical assumptions, actuarial and risk neutral valuation emerge as special cases of the proposed real world valuation. In long term liability and asset valuation, the proposed real world valuation can lead to significantly lower values than suggested by classical approaches when an equivalent risk neutral probability measure does not exist.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116855554","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Rethinking Limits on Tax-Deferred Retirement Savings in Canada","authors":"W. Robson","doi":"10.2139/SSRN.3067398","DOIUrl":"https://doi.org/10.2139/SSRN.3067398","url":null,"abstract":"Tax rules limiting the amount of tax deferral available to Canadians in various retirement saving vehicles need some measure of equivalency among them. Since 1990 this measure has been the Factor of Nine, based on the proposition that saving 9 percent of annual earnings will let a person buy a retirement annuity equal to 1 percent of pre-retirement income. A quarter century later, the flaws in the Factor of Nine are glaring and the case for change is compelling. The Factor of Nine is the result of calculations based on one particular type of defined-benefit pension plan operating under one specific set of demographic and economic circumstances. It is a crude measure. It neglects features that can make wealth accruals under different defined-benefit plans larger or smaller. It affects people of different ages differently. And it is badly out of date. People are living longer and – even more important – yields on investments suitable for retirement saving are very low. These changes have raised the cost of obtaining a given level of retirement income. The unchanged factor specifying equivalency puts people saving in money-purchase arrangements such as defined-contribution pension plans and RRSPs at a major disadvantage relative to people in definedbenefit plans. Three types of reforms could alleviate problems with the Factor of Nine: • Update the assumptions underlying the Factor of Nine to reflect current economic and demographic realities; doing that would raise the current annual tax-deferred savings limit from its current 18 percent to a number around or even exceeding 30 percent. • Level the playing field for tax-deferred saving by refining the factors so that they escalate with age and/or reflect differences in pension plan design. • Replace the current annual tax-deferred saving limits for defined-contribution pension plan participants and RRSP savers with more generous regimes: either index unused contribution room for inflation or, more farsightedly, establish an inflation-indexed lifetime tax-deferred savings limit that will permit all savers to achieve pension wealth equal to that of participants in relatively comprehensive defined-benefit plans. Inaction over another quarter century would be unconscionable. Canadians continue to live longer. Slower world growth and high saving will likely depress real returns for decades. Taxes deferred when people save for retirement get paid once people are retired. Canadians who do not participate in public-sector pension plans should have more opportunities to save, and unfair tax treatment should not stand in their way.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128613020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Cost of Equity, Pension Intensity Risk and Audit Quality: An Empirical Examination of Their Relations","authors":"R. Houmes","doi":"10.2139/ssrn.3062321","DOIUrl":"https://doi.org/10.2139/ssrn.3062321","url":null,"abstract":"Prior research documents that markets efficiently impound pension plan risk into a defined benefit plan’s market value. This study adds to these prior works by investigating how audit quality affects the pension risk – cost of equity relation. Using proxies to measure pension intensity, and audit quality, we document that audit quality attenuates the positive relation between a sponsoring firm’s cost of equity and the scaled magnitude of the firm’s pension intensity risk. We rationalize these findings by asserting that the positive relation between a defined benefit plan firm’s cost of equity and pension intensity reflects increased financial risk associated with higher pension obligations but the quality of the auditor reduces this risk.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"360 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125650227","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Cross-Subsidization of Teacher Pension Costs: The Impact of Assumed Market Returns","authors":"Robert M. Costrell, Josh B. McGee","doi":"10.2139/ssrn.3060795","DOIUrl":"https://doi.org/10.2139/ssrn.3060795","url":null,"abstract":"It is well-known that public pension plans exhibit substantial cross-subsidies, both within cohorts, e.g. from early leavers to those who retire at the “sweet spot”, and across cohorts, through unfunded liabilities. However, the cross-subsidies within and across cohorts have never been provided in an integrated format. This paper provides such a framework, based on the gaps between normal cost rates for individuals and the uniform contribution rates for the cohort. Since the unfunded liabilities and associated cross-subsidies across cohorts derive from overly optimistic actuarial assumptions, we focus on the historically most important such assumption, the rate of return. We present two main findings. First, an overly optimistic assumed return understates the degree of redistribution within the cohort. Second, persisting with an overly optimistic assumed return leads to steady-state contribution rates that exceed the true normal cost (let alone the low-balled rate), i.e. cross-subsidies from the current cohort to past cohorts. Using the case of California, we show how that negative cross-subsidy can easily swamp all positive cross-subsidies within the cohort, as contributions exceed the value of benefits received by even the most favored individuals – those who retire at the “sweet spot.”","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"117 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124920654","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"How Do Consumers Respond When Default Options Push the Envelope?","authors":"J. Beshears, S. Benartzi, R. Mason, Katherine L. Milkman","doi":"10.2139/SSRN.3050562","DOIUrl":"https://doi.org/10.2139/SSRN.3050562","url":null,"abstract":"Many employers have increased the default contribution rates in their retirement plans, generating higher employee savings. However, a large fraction of employers are reluctant to default employees into savings rates that are high enough to leave those employees adequately prepared for retirement without supplementary savings. There are two potential concerns regarding a high default: (i) it may drag an employee along to a high contribution rate even when this outcome is not in the employee’s best interest, and (ii) perhaps more importantly, it may cause an employee to opt out of plan participation entirely. We conducted a field experiment with 10,000 employees who visited a website that facilitated savings plan enrollment. They were randomly assigned to see a default contribution rate ranging from 6% (a typical default) to 11%. Relative to the 6% default, higher defaults increased average contribution rates 60 days after a website visit by 20-50 basis points of pay off of a base of 6.11% of pay. We find little evidence that the concerns with high defaults are warranted, although the highest default (11%) increases the likelihood of not participating by 3.7 percentage points. The evidence suggests that erring on the high side when choosing a default contribution rate is less likely to generate unintended consequences than erring on the low side.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126782268","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Updating Wilkie's Economic Scenario Generator for U.S. Applications","authors":"Saisai Zhang, M. Hardy, D. Saunders","doi":"10.2139/ssrn.3040259","DOIUrl":"https://doi.org/10.2139/ssrn.3040259","url":null,"abstract":"The Wilkie economic scenario generator has had a significant influence on economic scenario generators since the first formal publication in 1986 by Wilkie. In this article we update the model parameters using U.S. data to 2014, and review the model performance. In particular, we consider stationarity assumptions, parameter stability, and structural breaks.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127396672","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Behavior of Turkish Pension Plan Investors - Performance, Cost and Fund Flows","authors":"Y. O. Erzurumlu, Idris Ucardag","doi":"10.2139/ssrn.3022468","DOIUrl":"https://doi.org/10.2139/ssrn.3022468","url":null,"abstract":"We study the behavior of pension plan investors in Turkey regarding fund allocation and withdrawal with respect to return, risk and management fee. We find that investors avoid risk and there is a convex and positive relationship between risk-adjusted return and fund flows. Investors display disposition effect regarding nominal monthly return. Cost is a factor only for equity/foreign/gold funds group and present before the introduction of government contribution plan. Large funds experience net fund inflow while old funds experience net fund outflow indicating market competition force managements to reach to a certain size within a period. Plans offset fund outflow if they could keep investors with large portfolios.","PeriodicalId":407792,"journal":{"name":"Pension Risk Management eJournal","volume":"239 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134535311","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}