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Simulation model to forecast the consequences of changes introduced into the 2nd pillar of the Polish pension system

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  • Mielczarek, Bożena

Abstract

The 2nd pillar of the Polish pension system was recently modified. The government lowered the amount for obligatory contributions transferred to private open pension funds and redirected the difference to notional accounts. A Monte Carlo simulation model was developed to compare two variants of the Polish pension system. In the previous system, the premium was accumulated in open funds, and interest was earned as a result of real financial market mechanisms. In the current system, the premium is split into two flows, where one flow accumulates on the notional account and is indexed according to the rules defined by legislation. Assuming the same macro-economic circumstances, the economic implications of the new and previous pension system strategies were formulated from an individual worker's perspective. Terminal value and risk associated with investment were used to compare both systems. Simulation analysis for the 2nd pillar was run for this portion of the contribution, which had previously been transferred to private open funds but is now deposited into two different accounts (i.e., public and private). The experiments are conducted simultaneously for two variants of the pension systems, and the identical values of macro-economic forecasts are defined as the input data.

Suggested Citation

  • Mielczarek, Bożena, 2013. "Simulation model to forecast the consequences of changes introduced into the 2nd pillar of the Polish pension system," Economic Modelling, Elsevier, vol. 30(C), pages 706-714.
    • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:706-714
    DOI: 10.1016/j.econmod.2012.09.053
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    References listed on IDEAS

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    1. Richard Bieker, 2002. "Using simulation as a tool in selecting a retirement age under defined benefit pension plans," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(3), pages 334-343, September.
    2. van Sonsbeek, Jan-Maarten, 2010. "Micro simulations on the effects of ageing-related policy measures," Economic Modelling, Elsevier, vol. 27(5), pages 968-979, September.
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    Cited by:

    1. Mielczarek, Bożena & Zabawa, Jacek, 2021. "Modelling demographic changes using simulation: Supportive analyses for socioeconomic studies," Socio-Economic Planning Sciences, Elsevier, vol. 74(C).
    2. Shin Kimura & Tomoki Kitamura & Kunio Nakashima, 2023. "Investment risk-taking and benefit adequacy under automatic balancing mechanism in the Japanese public pension system," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-19, December.
    3. Yuehong Tian & Xianglian Zhao, 2016. "Stochastic Forecast of the Financial Sustainability of Basic Pension in China," Sustainability, MDPI, vol. 8(1), pages 1-17, January.

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