Study on Cash Flow of Volunteer Soldiers Retirement & Compensation Fund – From System Dynamics Perspective

Abstract

Countries around the world use various forms of retirement systems to reduce elderly’s economic risks. The military retirement system is one of the most important welfare measures of Taiwanese military. Facing strong military threats, Taiwan has implemented a volunteer recruitment policy. With the increasing number of volunteer soldiers every year, the ratio of volunteer soldiers over entire miliary population has risen continuously. Volunteer soldiers can retire and start to receive pensions after they have served for 4 years. Therefore, the amount of pension contributions for volunteer soldiers is small, and the short payment time cannot allow the pension fund to obtain long-term compound interest effects. The impact on the pension fund cannot be ignored. Thus, the impact of volunteer soldiers’ pension on the overall cash flow of the pension fund has become the issue to be discussed in this study. The study uses systematic dynamics to explore the relevant factors that affect the cash flow of volunteer soldiers’ retirement funds and the causal interaction between the factors; construct a dynamic model of the cash flow evaluation of volunteer soldiers’ retirement funds; simulate and quantitatively analyze the results; and propose policy recommendations for improving the pension system for volunteer soldiers.