Purpose

This paper aims to analytically show that in an over-lapping-generation (OLG) model, low earning cohorts bear unwanted risk and absorb higher economic cost than high earning cohorts do.

Design/methodology/approach

This paper aims to consider the individual's risk appetite, using a simple utility function, based on consumptions and discount rates in each period. This paper calibrates the model according to teh Israeli pension system as a representative of a small open developed organization for economic cooperation and development country. Israel is considered as unique case study in the pension landscape, as it implements almost pure defined contribution pension scheme with continuous trend of pension market capitalization (Giorno and Jacques, 2016). Hence, this study finds Israel suitable for examining the theoretical mix of pension scheme. That model enables exploring combined solutions for adequate old age benefits, involving the first and the second pension pillars, under fiscal constraints.

Findings

It comes out that for risk-averse individuals, the optimal degree of funding is negatively correlated to asset returns' volatility and positively correlated to earning decile level. The neglect of risk and individual's current earning level will thus overstate the contribution level and funded percentage from total contributions. Moreover, even in an economy with minimum government intervention, and highly developed private pension fund with high average of rate of return, the authors find it is optimal that the pension system contains a sizeable unfunded pillar. This paper innovates by revealing a socio-economic anomaly in design of mix pension systems in favor of high earning cohorts on the expense of economic loss of low earning cohorts.

Practical implications

The model presented in this paper could be implemented in countries with mix pension systems, as an alternative to public social transfers or means tested, alleviating poverty and inequality in old age. Additionally, this model could raise the public awareness of the financial sustainability of the unfunded pay-as-you-go pillar to diversify financial risk in pension systems, especially for low earning cohort in society.

Social implications

One area of research that is particularly relevant in this context concerns the issue of alleviating poverty and income inequality. It is often stressed that the prevention of old age poverty is among the central targets of well-designed pension system (Holzmann and Hinz, 2005). The conceptualization of minimum pension guarantee used in this composition allows to clearly capturing the notion of such a poverty and social targets as an integral part of the pension system rolls.

Originality/value

This paper innovates by revealing a socio-economic anomaly in design of mix pension systems in favor of high earning cohorts on the expense of economic loss of low earning cohorts. That comes to realize through the level of total contribution rates and funded share that are generally optimal for high earning cohorts but not for low earning cohorts. This paper identifies that the effect of anomaly is most significant in a market characterized with high income-inequality level. This paper finds that imposing intra-generational risk sharing instrument in the form of minimum pension guarantee can re-balance pension design among different earning cohorts. This solution demonstrates balancing effect on the entire economy.

中文翻译：

---

向多支柱养老金体系的过渡：固有的社会经济异常

目的

本文旨在分析表明，在重叠世代 (OLG) 模型中，低收入群体比高收入群体承担不必要的风险并吸收更高的经济成本。

设计/方法/方法

本文旨在基于每个时期的消费和贴现率，使用简单的效用函数来考虑个人的风险偏好。本文以以色列的养老金体系为代表，以开放的经济合作与发展小组织为代表，对模型进行校准。以色列被认为是养老金领域的独特案例研究，因为它实施几乎纯粹的固定缴款养老金计划，养老金市场资本化趋势持续（Giorno 和 Jacques，2016 年）。因此，本研究发现以色列适合检验养老金计划的理论组合。该模型能够探索在财政约束下获得充足老年福利的综合解决方案，包括第一和第二养老金支柱。

发现

结果表明，对于规避风险的个人，最佳融资程度与资产回报的波动性呈负相关，与收入十分位水平呈正相关。因此，对风险和个人当前收入水平的忽视将夸大缴费水平和总缴费中的资助百分比。此外，即使在政府干预最少、私人养老基金高度发达、平均回报率高的经济体中，作者发现，养老金体系包含一个相当大的无资金支柱是最佳的。本文通过揭示混合养老金体系设计中的社会经济异常来进行创新，以牺牲低收入群体的经济损失为代价，有利于高收入群体。

实际影响

本文中提出的模型可以在拥有混合养老金制度的国家实施，作为公共社会转移支付或经济调查的替代方案，减轻老年贫困和不平等。此外，这种模式可以提高公众对无资金支持的现收现付支柱的财务可持续性的认识，以分散养老金体系中的金融风险，特别是对于社会中的低收入人群。

社会影响

在这方面特别相关的一个研究领域涉及减轻贫困和收入不平等的问题。人们经常强调，预防老年贫困是精心设计的养老金体系的核心目标之一（Holzmann 和 Hinz，2005 年）。该组合中使用的最低养老金保障的概念可以清楚地捕捉到这种贫困和社会目标的概念，作为养老金体系的一个组成部分。

原创性/价值

本文通过揭示混合养老金体系设计中的社会经济异常来进行创新，以牺牲低收入群体的经济损失为代价，有利于高收入群体。这是通过总缴费率和资助份额的水平来实现的，这些水平通常对高收入人群来说是最佳的，但对低收入人群来说则不然。本文确定异常的影响在具有高收入不平等水平的市场中最为显着。本文发现以最低养老金保障的形式施加代内风险分担工具可以重新平衡不同收入群体之间的养老金设计。该解决方案展示了对整个经济的平衡效果。