Research Catalog

Title

Neutral or Fair? [electronic resource]: Actuarial Concepts and Pension-System Design / Monika Queisser and Edward Whitehouse

Author

Queisser, Monika.

Publication

Paris : OECD Publishing, 2006.

Details

Additional Authors

Whitehouse, Edward.

Description

44 p.; 21 x 29.7cm.

Summary

1. Economists and policymakers increasingly use the word "actuarial" in the analysis of pension systems and retirement incentives. But the debate is often confused. "Actuarial fairness" and "actuarial neutrality" are promoted loosely as desirable goals of pension reform. This paper distinguishes two actuarial concepts and discusses their importance for defined-benefit, defined-contribution and notional accounts pension plans. • Actuarial fairness, which requires that the present value of lifetime contributions equals the present value of lifetime benefits. Actuarial fairness relates to the entire lifetime of contributions and benefits • Actuarial neutrality, which requires that the present value of accrued pension benefits for working an additional year is the same as in the year before (meaning that benefits increase only by the additional entitlement earned in that year). Conversely, retiring a year earlier should reduce the pension benefit both by the entitlement that would have been earned during the year and by an amount to reflect the longer duration for which the pension must be paid. Actuarial neutrality is a marginal concept, relating to the effect of working an additional year. 2. The discussion shows that it is very difficult to design pension systems around these actuarial concepts alone. Most retirement income systems have several components; some of these may be actuarially fair or actuarially neutral but others, notably safety-nets to protect retirees from poverty, will by definition not fulfil the conditions of actuarial fairness or neutrality. Finally, both concepts are defined across the population, regardless of the systematic differences in life-expectancy between women and men or between low-income groups and richer workers. People who expect to live longer will get a better deal out of the pension system than those who are expected to die earlier.

Series Statement

OECD Social, Employment and Migration Working Papers, 1815-199X ; no.40

Uniform Title

OECD Social, Employment and Migration Working Papers, no.40.

Subject

Social Issues/Migration/Health

LCCN

10.1787/351382456457

OCLC

oecd-lib-001054

Author

Queisser, Monika.

Title

Neutral or Fair? [electronic resource]: Actuarial Concepts and Pension-System Design / Monika Queisser and Edward Whitehouse

Imprint

Paris : OECD Publishing, 2006.

Series

OECD Social, Employment and Migration Working Papers, 1815-199X ; no.40

OECD Social, Employment and Migration Working Papers, 1815-199X ; no.40.

Connect to:

http://dx.doi.org/10.1787/351382456457

Indexed Term

Social Issues/Migration/Health

Added Author

Whitehouse, Edward.

Other Standard Identifier

10.1787/351382456457 doi