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How should a points pension system be managed?

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  • Antoine Bozio

    (IPP - Institut des politiques publiques, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Simon Rabaté

    (IPP - Institut des politiques publiques, Centraal Planbureau)

  • Audrey Rain

    (IPP - Institut des politiques publiques)

  • Maxime Tô

    (IPP - Institut des politiques publiques, UCL - University College of London [London], Institute for Fiscal Studies)

Abstract

A points system, operating at defined yield, makes it possible to rethink how pension systems are managed. Instead of having to make repeated ad hoc changes to the parameters of the system, it is possible to define change rules that other guarantees to future pensioners, as regards not only their entitlements but also the long-term sustainability of the system. In this brief, and based on simulations of a variety of shocks to the pension system, we study what management rules deserve to be chosen. Two rules absolutely must be selected: firstly the growth in the value of the pension point should match the growth in salaries; and secondly converting the points into pension should take into account the life expectancy of each generation (cohort). A third rule that is important for the long term, is the relationship between the rules for index-linking claimed pensions and the amounts of the pensions when they start being claimed. This rule should serve as a guide to managers so that they can steer the system towards an equilibrium that is not based on too low an index-linking of the pensions. Such management implies high institutional autonomy for the system, whereby the managers need to be accountable for the finnancial equilibrium and for the risks to pension revaluation.

Suggested Citation

  • Antoine Bozio & Simon Rabaté & Audrey Rain & Maxime Tô, 2019. "How should a points pension system be managed?," Institut des Politiques Publiques halshs-02516413, HAL.
    • Handle: RePEc:hal:ipppap:halshs-02516413
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02516413v1
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    References listed on IDEAS

    as
    1. Antoine Bozio & Simon Rabaté & Audrey Rain & Maxime Tô, 2019. "Is a reference age necessary in a points pension system?," Post-Print halshs-02516417, HAL.
    2. Didier Blanchet & Antoine Bozio & Simon Rabaté, 2016. "Quelles options pour réduire la dépendance à la croissance du système de retraite français ?," Revue économique, Presses de Sciences-Po, vol. 67(4), pages 879-911.
    3. Kent Smetters, 2004. "Is the Social Security Trust Fund a Store of Value?," American Economic Review, American Economic Association, vol. 94(2), pages 176-181, May.
    4. Carole Bonnet & Antoine Bozio & Camille Landais & Simon Rabaté & Marianne Tenand, 2013. "Pension Reform: Towards an Overhaul of Family Rights?," Institut des Politiques Publiques halshs-02537467, HAL.
    5. Didier Blanchet, 2013. "The French pension system in the long run: balanced or not balanced?," Post-Print halshs-02527094, HAL.
    6. Auerbach, Alan J. & Lee, Ronald, 2011. "Welfare and generational equity in sustainable unfunded pension systems," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 16-27, February.
    7. repec:hal:pseose:halshs-01379321 is not listed on IDEAS
    8. repec:hal:journl:halshs-02527027 is not listed on IDEAS
    9. Carole Bonnet & Antoine Bozio & Camille Landais & Simon Rabaté & Marianne Tenand, 2013. "Pension Reform: Towards an Overhaul of Family Rights?," PSE-Ecole d'économie de Paris (Postprint) halshs-02537467, HAL.
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    1. Antoine Bozio & Simon Rabaté & Audrey Rain & Maxime Tô, 2019. "Is a reference age necessary in a points pension system?," Post-Print halshs-02516417, HAL.

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