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Generic NDC - Equilibrium, Valuation and Risk Sharing with and without NDC Bonds

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  • Palmer, Edward

    (Department of Economics)

Abstract

The Non-financial (Notional) Defined Contribution (NDC) PAYGO pension scheme is a recent innovation and its generic dimensions have not previously been explored in a coherent context. This paper does this. It derives and analyzes the demographic, economic and distributional properties of NDC. The residual (systematic) longevity risk creates a special problem, solved with an NDC bond, the asset that closes the system financially, transferring residual risk to the government (taxpayers). This guarantees a fixed NDC contribution rate and, thus, intergenerational commitment, with transparent distributional policy pursued through targeted transfers from general tax revenues and taxation of overall personal income.

Suggested Citation

  • Palmer, Edward, 2011. "Generic NDC - Equilibrium, Valuation and Risk Sharing with and without NDC Bonds," Working Paper Series 2011:3, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2011_003
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    References listed on IDEAS

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    Cited by:

    1. Blake, David, 2009. "NDC v FDC: Pros, cons and replication," MPRA Paper 33752, University Library of Munich, Germany.

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    More about this item

    Keywords

    NDC; Notional Defined Contribution; Non-financial Defined Contribution; NDC Bond; Risk sharing; Pension Policy; Pay-as-you-go; PAYG;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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