Basic Satisfaction Levels for Retirees

Transcription

1 w w w. I C A o r g Basic Saisfacion Levels for Reirees Disclaimer: This presenaion is a supplemen of he recorded discussion panel and he paper submied a ICA The auhors shall no be held liable for any improper or incorrec use of he informaion described and/or conained herein and assume no responsibiliy for anyone's use of he informaion. By Albero M. Ramírez de Jurado F. Washingon DC, U.S. April 2,

2 Conens Where we sand Homogeous meric Comparaive resuls Discussion and Q&A Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

3 Where we sand America is dynamic coninen ha requires an addiional meric o compare pension benefis for economically acive workers planning reiremen. Some reasons: Sysem performance comparison Benefi projecion planning Reiremen urism Transparency Public policy Counry: A B C D Analogy: For Defined Conribuion plans, he annuiizaion process a reiremen is like buying ice-cream. In his analogy, he funds saved for reiremen, purchase differen ice-cream sizes and flavors (insead of annuiies). Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

4 Where we sand The Organisaion for Economic Co-operaion and Developmen (OECD) repors he acual replacemen raes for is members. In America, only Canada, Chile, Mexico and U.S. are members. Gross pension replacemen raes* Pension enilemen as percenage of pre-reiremen earnings, single persons Percenage of pre-reiremen earnings Male Female Gross Replacemen Rae Gross Replacemen Rae Low earner Average earner High earner Low earner Average earner High earner Canada Chile Mexico Unied Saes OECD - Toal Source: OECD (2014) *The gross replacemen rae is defined as gross pension enilemen divided by gross pre-reiremen earnings. I is a measure of how effecively a pension sysem provides income during reiremen o replace earnings, he main source of income prior o reiremen. Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

5 Homogeneous meric The Tradiional Replacemen Rae (TRR) uses he final salary or pre-reiremen earnings (S) as a parameer of he main source of income prior o reiremen. f TRR = (12) ä y The Basic Saisfacion Level (BASAL) uses a deerminisic projecion of he Consumer Price Index (CPI) and Basic Baske (PB) o deermine how effecively a pension provides income reiremen o purchase he Basic Baske. S BASAL = (12) ä y f PB Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

6 Homogeneous meric The = uses he following parameers: BASAL (12 ) ä y f PB f PB is he accumulaed fund for accumulaion period is he projeced basic marke baske for he accumulaion period () f i Where is he difference beween he enry age (x) and reiremen age (y) µ i λ i µ i λ i δ i = fi ( 1 yi ) e + yie e + Si c β 1+ s 1 yi e + yie [ ] 2 ( )( ) ( ) e δ i c is he conribuion percenage over he pre-reiremen salary Si a year i, and β is he commission charged on he value of he conribuions, he facor s is he real salary increase, yi is he percenage allocaed o fix reurn insrumens, µ and δ he invesmen reurns for he respecive porfolios during he annual inerval (i,i+1), dela is he commission over invesmen. Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

7 Comparaive resuls Below is a comparaive able wih informaion from 9 counries who are permanen or have been gues members of he OECD: Source: Gómez-Hernández, Ramírez de Jurado (2014). Argenina is no included because moved away from DC model in 2008 Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

8 Comparaive resuls Basal vs Tradiional Replacemen Rae (TRR) Noe: An age (25) worker wih average earnings, was used Raio of final pension by iem o projec is DC pension fund a reiremen age, i.e. projeced TRR and BASAL was - calculaed a (65) Canada Benchmark comparison for BASAL and Replacemen Rae Mexico Unied Saes Cosa Rica El Salvador Colombia Brazil Chile Uruguay Basic Saisfacion Level (BASAL) - Basic Baske Tradiional Replacemen Rae - Salary Norh Cenral Souh Source: Gómez-Hernández, Ramírez de Jurado (2014). Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

9 Comparaive resuls Some aribues of BASAL comparabiliy: Sandard. Projeced macroeconomic parameers in he BASAL like he basic baske and inflaion (CPI), are ypically provided by he cenral banks Flexible. The adapive cummulaive model is sensiive o ypical DC schemes paramerizaion, e.g. uses he invesmen reurns, porfolio disribuion, salaries, conribuions and commissions policies Economeric. Enables users o projec and benchmark he pension enilemen and reflecs he projeced purchasing power of a basic baske of goods a reiremen Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

10 Comparaive resuls BASAL in ice cream erms l pension by iem Raio of final Canada Mexico Unied Saes Cosa Rica El Salvador Colombia Brazil Chile Uruguay Norh Cenral Souh Basic Saisfacion Level (BASAL) - Basic Baske Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

11 Comparaive resuls References: Ramírez de Jurado Frías, Meodología para la Proyección el Mono Consiuivo de la Cuena Individual enro del sisema de ahorro para el Reiro en México. Revisa Organisaion for Economic Co-operaion and Developmen (OECD) and Pensions a a Glance 2011: Reiremen-income Sysems in OECD and G20 Counries. Paris: OECD Publishing. Gómez-Hernández, Ramírez de Jurado, The Efficiency of Defined Conribuion Pension Plans. Social Securiy and Pension Reform, Inernaioal Perspecives, UPJOHN Insiue,. Basic Saisfacion Levels for Reirees Pension/PBSS April 2,

12 Discussion and Q&A Thank you Conac Deails: Name: Albero Ramírez Basic Saisfacion Levels for Reirees Pension/PBSS April 2,