Notional defined contribution pension schemes and income patterns
AbstractDuring the 1990s, some important European countries such as Italy and Sweden radically transformed their public pension systems by adopting defined-contribution rules while retaining a pay-as-you-go financial architecture. The paper inquires into the theoretical properties of such notional defined contribution pension schemes in order to identify the determinants of the replacement rates awarded to individuals with different income patterns. Three typical career patterns are taken into consideration, according to whether the individual's wage growth is equal to, higher than, or lower than average wage growth. The impact of, and the possible remedies to, a possible discontinuity in replacement rates is assessed by means of a sensitivity analysis of replacement rates with respect to career length (for a given retirement age), the retirement age, and the rate of return credited to individual accounts. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2012-58.
Date of creation: 2012
Date of revision:
Notional Defined Contribution (NDC); replacement rates; income patterns;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-11-24 (Economics of Ageing)
- NEP-ALL-2012-11-24 (All new papers)
- NEP-LAB-2012-11-24 (Labour Economics)
- NEP-PBE-2012-11-24 (Public Economics)
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