Generic NDC - Equilibrium, Valuation and Risk Sharing with and without NDC Bonds

Edward Palmer

27 citations0/0 files storedRePEc: Research Papers in Economics

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Financial Literacy, Pension, Retirement Analysis Economic and Fiscal Studies Economic Policies and Impacts

Abstract

The Non-financial (Notional) Defined Contribution (NDC) PAYGO pension scheme is a recent innovation and its generic dimensions have not previously been explored in a coherent context. This paper does this. It derives and analyzes the demographic, economic and distributional properties of NDC. The residual (systematic) longevity risk creates a special problem, solved with an NDC bond, the asset that closes the system financially, transferring residual risk to the government (taxpayers). This guarantees a fixed NDC contribution rate and, thus, intergenerational commitment, with transparent distributional policy pursued through targeted transfers from general tax revenues and taxation of overall personal income.

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1958An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money 2002Broken Limits to Life Expectancy 1992Modeling and Forecasting U. S. Mortality 2001Evaluating the Performance of the Lee-Carter Method for Forecasting Mortality 2003The Gains from Pension Reform 2001Survivor Bonds: Helping to Hedge Mortality Risk 2005Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform 2006Living with Mortality: Longevity Bonds and Other Mortality-Linked Securities

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2017Automatic balancing mechanisms for notional defined contribution accounts in the presence of uncertainty

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