28.01.2019 14:15 Pierre Devolder:
OPTIMAL RISK SHARING IN PUBLIC PENSION SCHEMESBC1 2.02.01 (Parkring 11, 85748 Garching)

Traditionally, public pension schemes, organized in a social security framework, use a pay as you go technique (PAYG); from the benefit point of view, they are based on a Defined Benefit (DB) or a Defined Contribution (DC) approach. This dichotomy follows two extreme philosophies of risk spreading between the stakeholders: in DB, the organizer of the plan bears the risks; in DC (including the Notional accounts – NDC), the affiliates must bear the risks. Especially applied to social security, this traditional polar view can lead to unfair intergenerational equilibrium in both cases. The purpose of this presentation is to propose, in PAYG, alternative hybrid architectures based on a mix between DB and DC, in order to achieve simultaneously financial sustainability and social adequacy in a stochastic environment. Using different stochastic models for the risk factors, we propose different levels of optimality in terms of architecture of the pension scheme.