Optimal Funding And Asset Allocation Rules For Defined Benefit Pension Plans
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Optimal Funding And Asset Allocation Rules For Defined Benefit Pension Plans
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Author : J. Michael Harrison
language : en
Publisher:
Release Date : 1982
Optimal Funding And Asset Allocation Rules For Defined Benefit Pension Plans written by J. Michael Harrison and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1982 with Pension trusts categories.
This paper considers a world in which pension funds may default, the cost of the associated risk of default is not borne fully by the sponsoring corporation, and there are differential tax effects. The focus is on ways in which the wealth of the shareholders of a corporation sponsoring a pension plan might be increased if the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) follow simple and naive policies. Under the conditions examined, the optimal policy for pension plan funding and asset allocation is shown to be extremal in a certain sense. This suggests that the IRS and the PBGC may wish to use more complex regulatory procedures than those considered in the paper.
Pension Fund Investment Policy
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Author : Zvi Bodie
language : en
Publisher:
Release Date : 1988
Pension Fund Investment Policy written by Zvi Bodie and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Aging categories.
The purpose of this paper is to survey what is known about the investment policy of pension funds. Pension fund investment policy depends critically on the type of plan: defined contribution versus defined benefit. For defined contribution plans investment policy is not much different than it is for an individual deciding how to invest the money in an Individual Retirement Account (IRA). The guiding principle is efficient diversification, that is, achieving the maximum expected return for any given level of risk exposure. The special feature is the fact that investment earnings are not taxed as long as the money is held in the pension fund. This consideration should cause the investor to tilt the asset mix of the pension fund towards the least tax-advantaged securities such as corporate bonds. For defined benefit plans the practitioner literature seems to advocate immunization strategies to hedge benefits owed to retired employees and portfolio insurance strategies to hedge benefits accruing to active employees. Academic research into the theory of optimal funding and asset allocation rules for corporate defined benefit plans concludes that if their objective is shareholder wealth maximization then these plans should pursue extreme policies. For healthy plans, the optimum is full funding and investment exclusively in taxable fixed-income securities. For very underfunded plans, the optimum is minimum funding and investment in the riskiest assets. Empirical research so far has failed to decisively confirm or reject the predictions of this theory of corporate pension policy. Recent rule changes adopted by the Financial Accounting Standards Board regarding corporate reporting of defined benefit plan assets and liabilities may lead to a significant shift into fixed-income securities. The recent introduction of price-level indexed securities in u.s. financial markets may lead to significant changes in pension fund asset allocation. By giving plan sponsors a simple way to hedge inflation risk, these securities make it possible to offer plan participants inflation protection both before and after retirement.
Dynamic Asset Liability Management For Defined Benefit Pension Plans
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Author : Jerome Detemple
language : en
Publisher:
Release Date : 2008
Dynamic Asset Liability Management For Defined Benefit Pension Plans written by Jerome Detemple and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
A dynamic asset-liability management model for defined-benefit pension plans is developed. The plan can be in surplus or deficit. The sponsor is loss averse and tolerates limited shortfalls in assets under management relative to the liability due. The optimal contribution policy, the optimal dividend policy and the associated asset allocation rule are derived and analyzed. Sound Asset-Liability Management is shown to entail future withdrawals from as well as future contributions to the pension fund, even if the current funding shortfall is large. The impact of model parameters, such as contribution capacity, shortfall ratios tolerated, risk aversion and loss aversion, is examined. Wealth effects are found to be critical for the properties of asset allocation rules.
Valuation Optimal Asset Allocation And Retirement Incentives Of Pension Plans
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Author : Suresh M. Sundaresan
language : en
Publisher:
Release Date : 1996
Valuation Optimal Asset Allocation And Retirement Incentives Of Pension Plans written by Suresh M. Sundaresan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Pension trusts categories.
Frontiers In Pension Finance
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Author : Dirk Broeders
language : en
Publisher: Edward Elgar Publishing
Release Date : 2009-01-01
Frontiers In Pension Finance written by Dirk Broeders and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-01-01 with Business & Economics categories.
In this fresh and valuable volume, experts from across the world provide guidance on pension design, risk management, and governance that is urgently needed in this rapidly changing pension environment. Aging populations are putting pressure on pay-as-you-go pension systems and spurring a shift to prefunded plans. Greater prefunding requires efficient risk management and judicious regulation and supervision. This book provides state-of-the-art analyses of these issues and should be required reading for scholars, practitioners, and anyone interested in the future of pensions. Alicia H. Munnell, Boston College Carroll School of Management and Center for Retirement Research, US How to deliver adequate pension benefits at reasonable costs is a huge challenge confronting our ageing societies. This book delivers a comprehensive overview of the latest insights into pension finance, pension system design, pension governance and risk based supervision. It combines state-of-the-art analyses with innovative policy proposals to increase the efficiency and resilience of pension systems and to advance these systems contribution to global financial stability. Renowned pension experts offer cutting-edge guidance for future decision making and the development of best practices. This exciting exploration of the frontiers in pension finance highlights key aspects of securing long term retirement provisions. Frontiers in Pension Finance will be of interest to a wide-ranging audience, especially academic researchers, pension practitioners, supervisors and public sector policymakers.
Governance And Investment Of Public Pension Assets
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Author : Sudhir Rajkumar
language : en
Publisher: World Bank Publications
Release Date : 2011
Governance And Investment Of Public Pension Assets written by Sudhir Rajkumar and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Social Science categories.
And key messages -- Key principles of governance and investment management -- Governance of public pension assets -- Governance structures and accountabilities -- Qualification, selection, and operation of governing bodies -- Operational policies and procedures -- Managing fiscal pressures in defined-benefit schemes -- Policy responses to turbulent financial markets -- Investment of public pension assets -- Defining the investment policy framework for public pension funds -- Managing risk for different cohorts in defined-contribution schemes -- An asset-liability approach to strategic asset allocation for pension funds -- In-house investment versus outsourcing to external investment managers -- International investments and managing the resulting currency risk -- Alternative asset classes and new investment themes.
Financial Aspects Of The United States Pension System
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Author : Zvi Bodie
language : en
Publisher: University of Chicago Press
Release Date : 2008-04-15
Financial Aspects Of The United States Pension System written by Zvi Bodie and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-04-15 with Business & Economics categories.
This book provides valuable information and analysis to managers, policymakers, and investment counselors in the rapidly expanding field of pension funding. American workers, too, need answers and insights on how to invest their money and plan for their retirement. fifteen of America's leading financial analysts address such pressing questions as -What is the current financial status of the elderly, and how vulnerable are they to inflation? -What is the impact of inflation on the private pension system, and what are the effects of alternative indexing schemes? -What roles can the social security system play in the provision of retirement income? -What is the effect of the tax code and the Employee Retirement Income Security Act of 1974 (ERISA) on corporate pension policy? -How well funded are corporate pension plans, and is a firm's unfunded pension liability fully reflected in the market value of its common stock? Many of the conclusions these experts reach contradict and challenge popular views, thus providing fertile ground for innovation in pension planning.
Pension Fund Risk Management
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Author : Marco Micocci
language : en
Publisher: Chapman and Hall/CRC
Release Date : 2010-01-25
Pension Fund Risk Management written by Marco Micocci and has been published by Chapman and Hall/CRC this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-01-25 with Business & Economics categories.
As pension fund systems decrease and dependency ratios increase, risk management is becoming more complex in public and private pension plans. Pension Fund Risk Management: Financial and Actuarial Modeling sheds new light on the current state of pension fund risk management and provides new technical tools for addressing pension risk from an integrated point of view. Divided into four parts, the book first presents the correct measurement of risk in pension funds, fund dynamics under a performance-oriented arrangement, an attribution model for monitoring the performance and risk of a defined benefit (DB) pension fund, and an optimal investment problem of a defined contribution (DC) pension fund under inflationary risk. It also describes a pension plan from a dynamic optimization viewpoint, the optimal asset allocation of U.S. pension funds, the identification of stakeholders’ risks, value-at-risk (VaR) methodology, and various effects on the asset allocation of DB pension schemes. The second section focuses on the effects of uncertainty on employer-provided DB private pension plan liabilities; wage-based lump sum payments by death, retirement, or dismissal by the employer; fundamental retirement changes; occupational pension insurance in Germany; and longevity risk securitization in pension schemes. In the third part, the book examines employers’ risks, accountability rules and regulations, useful actuarial analysis instruments, risk-based solvency regime in the Netherlands, and the impact of the 2008 global financial crisis on pension participants. The final part covers DB pension freezes and terminations of plans, the two-pillar social security system of Italy, the Greek social security system, the effect of a company’s unfunded pension liabilities on its stock market valuation, and the returns of Spanish balanced pension plans and portfolio performance. With contributions from well-known, international academics and professionals, this book will assist pension fund executives, risk managers, consultants, and academic researchers in attaining a clear picture of the integration of risks in the pension world. It offers a comprehensive, contemporary account of how to handle the risks involved with pension funds.
Defined Benefit Pension Plans And A Firm S Choice Of Labor And Capital
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Author : Greg Niehaus
language : en
Publisher:
Release Date : 1986
Defined Benefit Pension Plans And A Firm S Choice Of Labor And Capital written by Greg Niehaus and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1986 with Insurance, Pension trust guaranty categories.
New Policies For Mandatory Defined Contribution Pensions
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Author : Gregorio Impavido
language : en
Publisher: World Bank Publications
Release Date : 2010-06-04
New Policies For Mandatory Defined Contribution Pensions written by Gregorio Impavido and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-06-04 with Business & Economics categories.
Mandatory defined contribution pension markets are present in a growing number of countries around the world. But despite their popularity, policymakers continue to struggle with two key policy concerns. On the one hand, a number of design shortcomings encourages pension firms to charge high administrative fees. On the other hand, the global crisis that started in 2007 has reignited the debate on whether pension participants bear excessive investment risk. Both are valid policy concerns as their incidence can imply higher than expected levels of poverty among old age individuals. Both concerns have the same root problem---the limited capacity of individuals to choose what is best for them. This, in turn, stems from a combination of inadequate financial education, bounded rationality and the use of simplistic 'rules of thumb' that produce systematic biases in the decision making process of individuals. While improving financial education is an obvious avenue to pursue, this book is more concerned with design features that can exploit these systematic biases to protect consumers from themselves. 'New Policies for Mandatory Defined Contribution Pensions: Industrial Organization Models and Investment Products' (i) discusses the main implications for the functioning of mandatory defined contribution pensions of consumers inability to make rational choices; (ii) describes how jurisdictions have tried to address these problems through ad hoc policy interventions; and (iii) proposes new policy directions in the areas of industrial organization models and investment products to address these concerns more effectively. Written for practitioners and researchers around the world, this book provides access to new thinking on mandatory defined contribution pension systems and it makes an important contribution to the on-going policy debate on how to best structure mandatory defined contribution pillars.