Voluntary Pension Research Articles

IMPACT OF THE ECONOMIC FACTOR ON THE SOCIAL SECURITY SYSTEM

The economic factor and its strong influence is determined mainly by the funds received from social security contributions in the social security system, by the number of persons employed, by the pension costs and the amount of the maximum social security income, as well as by the average monthly salary. Funds allocated to pensions are a major economic factor that has a major impact on the social security system. The more money is spent on pensions, the greater the negative financial effect on the social security system. The unfavorable demographic trends and the aging of the population in Bulgaria have led to higher pension expenditures. The purpose of the report is to show the great importance of the economic factor as an essential element of the social security system. The funds allocated for pensions in the social security system are essential. As the population ages, pension costs increase, so does the burden on the social security system. The current social security system is based on three pillars - mandatory pension insurance, mandatory supplementary and supplementary voluntary pension insurance. Compulsory pension insurance is in fact a continuation of the previously operating pension system, based on the pay-as-you-go system, with modifications to somehow link people's contributions to the pensions received. The insured pay social security contributions, which are distributed and paid in the form of a pension to the disabled. Compulsory supplementary pension insurance is the second pillar of the system and is based on the so-called funds or capital principle. The contributions of the insured persons are transferred to pension funds, which invest the resources in investment instruments. As it has already become clear, the three-pillar model in Bulgaria is a mix of the cost-covering and capital models. The problems in these models quite naturally have an impact on the chosen three-pillar model in Bulgaria. The main idea behind the cost-covering model is that working young people contribute to the pension system and these contributions are used to pay the pensions of the currently disabled. The model can be considered as a kind of social transfer of resources between generations. Young people work and pay a "social tax", and the disabled receive an income (pension) that provides them with consumption. The results show that more and more funds are needed for the social security system, which are obtained through grants from the national budget.

AN OVERVIEW OF VOLUNTARY PRIVATE PENSION FUNDS IN TURKEY

We provide an overview of the voluntary pension fund market in Turkey by starting with recent developments in the global pension markets and then focusing on the pension fund reform in Turkey and the following developments since 2003. Findings from the literature indicate that the reforms on the introduction of voluntary pension funds in Turkey have positive implications for the overall national savings rates and capital market development. Voluntary pension funds create extra income for beneficiaries after their retirement. However, redesigning the system in a simplified structure is necessary in order to increase participation, inclusion and also to ensure persistency.

Accumulative pension system: current issues

Problem setting. The pension system is an area in which economic and social relations are intertwined. Its functioning depends on external and internal factors, at the same time the pension system itself has a very diverse impact on various processes of society, including the processes of reproduction of labor. We must state that the process of reforming the pension system in Ukraine has always been too politicized, which has led to inconsistent actions and unsatisfactory results in the long run. None of the Ukrainian governments has been able to achieve a decent standard of living for the elderly at an affordable price. The large deficit of the Pension Fund - the gap between pension obligations to retirees and income, continues to threaten economic stability and push to the background the necessary investments in health care, education, infrastructure and defense. Target of research is to reveal current issues related to the introduction of the funded pension system. Analysis of resent researches and publications. Researchers such as V. Zhernakov, V. Kostyuk, O. Protsevsky, A. Slyusar, M. Shumylo, V. Shcherbyna, and others were engaged in research in the field of pension provision. Article’s main body. The article covers the issues of levels that exist in the pension system of Ukraine. The essence of the functioning of the solidary pension system is revealed. These problems that currently exist regarding the pension provision of citizens are mentioned. The system of voluntary non-state pension provision is described, it is indicated that it is based on non-state pension funds. It is determined that the accumulative pension system is based on mandatory pension insurance, which is based on the principles of the distributive and accumulative pension system. Emphasis is placed on the fact that the funds that will accumulate in the pension accounts of citizens will be the property of these citizens. It is concluded that the process of reforming the pension system in Ukraine has always been too politicized, which has led to inconsistent actions and unsatisfactory results in the long run. The author outlines a number of fundamental issues regarding the construction and implementation of the funded pension system in Ukraine. It is noted that funded pension systems of the second level with defined contributions can demonstrate different construction options, active or passive investment strategies, investment choice options and investment managers and payment options. It is concluded that mandatory pension systems, both state solidarity and fully or partially accumulative, are only tools that determine the method of distribution of future consumption between economically active and inactive members of society. There are a number of prerequisites that are necessary for the effective implementation of the mandatory funded pension system. Conclusions. Our state must still introduce a funded pension system, because the solidarity system has experienced a crisis, and the pension provision of our citizens must be decent. There must be a reasonable approach to its effective implementation, and, of course, citizens' awareness and confidence in their retirement future.

Long-term cash flows of mandatory and voluntary pension funds in Croatia and their impact on asset allocation

Long-term cash flows of mandatory and voluntary pension funds in Croatia and their impact on asset allocation

Modelling Development of Voluntary Pension Fund Using Mathematical Model of Approximation with Lagrange Interpolation Polynomials

Abstract Corporate social responsibility (CSR), as a concept that tackles economic, The introduction of private pension funds is the essence of the reform of the pension system in Serbia. Private pension funds in Serbia are based on voluntary benefits. Thus, the functioning of the pension system takes place in three interconnected processes: payments to a voluntary pension fund, investment of free funds, and ultimately programmed payments – pensions. The stability in the voluntary pension funds and the predictability of payments allow the quality of investment portfolio to be formed and achieve a long-term yield of investment. In this paper, we implement a well-known approximation method of Lagrange polynomial interpolation. We use it in order to find appropriate mathematical model for prediction of the number of fund members and the average salary in Serbia. This calculation is based on data (average salaries and fund member) from the last five years, i.e. from the period 2015-2019. We calculated the exact mathematical formula, then we compared the results and predictions obtained with that formula and with the formula from one of our previous works. In keeping with that, the appropriate conclusions were given..

Factors Affecting Intention to Purchase Voluntary Pension Insurance in Vietnam

The research was carried out with the aim to identify factors affecting the intention to purchase voluntary pension insurance in Vietnam. With data collected from 334 subjects across the country, mainly in Hanoi, the results showed that attitude towards risk, subjective norms, percieved behavioral control, past experiences and corporate branding have positive influences on the central factor, which is intent. After quantitative analysis, the study proposes recommendations for businesses to improve their services as well as methods of distribution to meet the needs of potential customers to save in pension funds. Additionally, the study will provide the basis for regulators to come up with measures to promote the retirement insurance market and at the same time, raise public awareness about social security. Keywords: voluntary pension insurances, pension funds, puchase intention, TPB, annuity. DOI: 10.7176/EJBM/13-10-06 Publication date: May 31 st 2021

Voluntary Private Investments Role in Pension System in Latvia

Pension systems have become one of the main priorities for the national governments. Developed countries population is getting older by putting the pressure on the state budgets and work age people tax load. The current pension system in Latvia performs according to regulation of state compulsory unfunded pension scheme since 1996 and regulation of the state funded or accumulated pension scheme since 2001. The third pension system pillar is private voluntary pension schemes realized in form of people contributions into pension funds and life insurance policies. Aim of the research – deeper analyses of voluntary private investments as the pension system part and its development challenges in Latvia. Research methods: scientific publications and previous conducted research analysis; analysis of time series on private pension fund developments in Latvia and comparisons with the situation in other OECD countries. The authors were looking for answer on the question – can voluntary private investments cover the gap between pre-retirement and after-retirement income of population in Latvia and what are the pre-conditions for it.

Empirijska studija štednje kroz životno osiguranje u Republici Srbiji

Life is a natural course, full of uncertainty and temptation of every human being. In order to make our lives more peaceful and have a more peaceful future, we are trying in various ways to secure ourselves and make our lives safer. Savings through insurance is a life-saving type of savings that involves the material protection of an individual against the risk of premature death and loss or loss of ability to earn money. In conditions where the solidarity-based pension system is unsustainable, it is necessary to develop voluntary pension insurance and savings through life insurance, as sources of long-term savings and additional sources of financing. The subject of this research is to answer the question of what people think about saving through life insurance. The main objective of this research is to evaluate the attitude of the residents of the Republic of Serbia towards saving through life insurance. The survey was conducted on the territory of the entire Republic of Serbia, on a suitable sample of 500 respondents. Through this paper, the citizens' attitude towards saving through life insurance in the Republic of Serbia is analyzed in one place. By analyzing the data from the survey, we can conclude that the general hypothesis is confirmed: Residents are not satisfied with the current state of savings through life insurance in the Republic of Serbia.

Analiza efikasnosti finansijskih institucija u Srbiji na bazi OCRA metode

Recently, as is well known, the performance and efficiency of financial institutions are increasingly being measured on the basis of multi-criteria analysis. With this in mind, this paper analyzes the efficiency of financial institutions in Serbia based on the OCRA method. In this context, adequate measures have been proposed to improve the efficiency of financial institutions in Serbia in the future. Based on the obtained results of research on the efficiency of financial institutions in Serbia using the OCRA method, it can be concluded that banks and insurance companies are the most efficient in order. They are in order: other financial institutions, financial leasing providers, voluntary pension funds, broker-dealer companies, open-end investment funds, voluntary pension fund management companies and investment fund management companies. This positioning of financial institutions in Serbia was influenced by numerous macro and micro factors. The development of the financial market plays a significant role in this. It is still not at the level of developed market economies.

PORTFOLIO AND BENCHMARK RETURNS OF PRIVATE PENSION FUNDS: A COMPARATIVE ANALYSIS FOR TURKEY

The purpose of this study is to ascertain whether pension fund returns are in line with benchmark returns taking into account the regulatory structure in Turkey. The methodology of the study is the cumulative portfolio returns. Data is retrieved from TEFAS Platform and official web site of Capital Market Board of Turkey. Portfolio and benchmark of pension funds are compared. Only standard pension funds are covered within the scope of voluntary pension funds of Turkey. Findings are as follows; Portfolio returns and benchmark returns are in line significantly. The results are partly attributable to the regulations about pension fund management and portfolio structure. The paper also shows that in the long term, the volatility of returns decreases and returns prove to conform with the primary purpose of the private pension system.

What Are the Main Socio-Economic and Behavioral Characteristics That Determine Voluntary Pension Contributions for Self-Employed Workers in Chile?

This study contributes to the literature by examining how socio-economic and behavioral characteristics such as neighborhood income inequality and peer effects determine voluntary pension contributions for self-employed workers in Chile. We use a survey representative of the Chilean household sector and we run five different probit regressions to elucidate voluntary contributions to the pension system for self-employed workers. Additionally, we run probit models with a heteroscedastic structure (hetprobit models). The results show that the driving forces of the decision to contribute for retirement are significantly related to age, income, sex, area of residence, education, belonging to or from indigenous descent, multidimensional poverty, job formality, cash transfers, having a current account and credit card. Exceptionally, this study finds that behavioral aspects, that where not considered in depth so far both in research and public policy, are significant in savings contribution. Our research concludes that neighborhood income inequality and peer effects should be further analyzed as part of the context for which public policies are designed.

Targeting Risk Lovers? Taxation of Private Pension Savings, Risk Preferences, and Gender

Many countries need to stimulate savings, and especially voluntary pension planning, to meet the demands of an ageing population. This is especially true for the female population as women are expected to live longer while simultaneously having accumulated lower pension wealth. Sweden has been a front-runner in introducing tax-deferred designated pension accounts to stimulate private pension saving, along with self-directed individual public pension accounts. However, a particular feature of these tax-deferred designated pension accounts was that savings were taxed through a presumptive return. In this Article, we show that with heterogeneous risk preferences, this tax policy makes designated pensions unattractive for risk-averse individuals. Using data on self-directed choices and designated pension savings, we empirically confirm our result. In particular, we show that as women are on average more risk averse compared to men, this tax policy had negative effects for women. This Article thus sheds light on the importance of accounting for risk preferences in policymaking addressed towards stimulating adequate pension planning. The Article additionally sheds light on the overall negative consequences of a presumptive tax design such as, e.g., the Dutch “Box-III” tax system.

The Pension System in Modern Russia: Reform after Reform.

ABSTRACT In recent years, Russia has adopted a number of laws that have significantly changed the institutional structure of the national pension system (corporatization of pension funds, creation of a system for guaranteeing pension savings, and the freezing of funded pensions). In addition, a very controversial law raising the retirement age came into effect at the end of 2018, and the Bank of Russia and the Ministry of Finance of the Russian Federation have prepared a draft law creating a voluntary system of individual pension capital. Based on a comparison of the key demographic and pension indicators of Russia and countries in the Organization of Economic Cooperation and Development (OECD), the author concludes that there were no valid grounds for the recent increase in Russia’s retirement age (especially for men). He also calls into question the assertions of the draft law’s supporters concerning excessive transfers from the federal budget to the mandatory pension insurance system. Starting from the prior experience of the Russian Federation’s pension sector, an attempt is made to assess the extent to which the enacted laws will support growth in personal savings within voluntary pension schemes. In particular, it is shown that in the coming years, the system of individual pension capital currently under development can only partially replace pension contributions on the long-term money market.

Tax Incentives as a Part of Governments’ Applied Mechanisms for the Third Pension Pillar in Estonia, Latvia, and Lithuania

The main objective of the improvements to public pension systems is to create a balanced three-pillar pension structure and increase public accountability for pension capital formation. Most pension systems are based on the first two pension system pillars – mandatory contributions in the state compulsory unfunded pension scheme and the state-funded or accumulated pension scheme in pension funds. However, the pension level adequacy has been reached by adding the third pension system pillar - voluntary investments in private pension funds. Governments are private pension system policymakers by defining a legal framework and providing tax incentives for voluntary investments for retirement. In the Baltic countries – Estonia, Latvia, and Lithuania, the third pension pillar is at an early stage of its development, and as such, should be particularly stimulated. This research focuses on the tax incentives utilized by the governments of Estonia, Latvia, and Lithuania and aims to ascertain and compare the effectiveness of the tax incentive policies applied to the third pension pillar by the governments of the three Baltic countries. It questions the effectiveness of the incentive mechanisms the governments of the Baltic countries have chosen, which include involving most of the population in the private pension saving programs. The research methods used are the analysis of scientific publications on the previously conducted research, acts of legislation of Baltic countries, as well as an analytical study of statistical data on the development of voluntary pension fund contributions in Estonia, Latvia, and Lithuania. The research results indicate that the tax incentives are the mechanism to motivate the population to create savings in the third pension pillar in all three Baltic countries. However, Latvia being the country with the highest coverage rate of the third pension pillar has the most unfavorable conditions for creating savings. There are no tax incentives on returns on investment and tax-exempt withdrawals in Latvia, while Estonia and Lithuania have all positions tax-exempt. A more detailed analysis of the tax incentives at the contribution stage explains the underdeveloped third pension pillar in Lithuania, as Lithuanian personal income tax reliefs are targeted at low or medium wages or gross income. The research has highlighted the impact of tax incentives on voluntary savings for retirement in the three Baltic countries, opening a discussion about the effectiveness of governments' applied mechanisms.

Selection of Retirement Saving Plan for a Private-sector Employee in Pakistan

Tehmina Khan, a 35-year-old, married mother of two, had been working as an assistant professor at a private sector university, University of Management and Information (UMI), School of Business. For the last few years, she had been saving for her retirement via a provident fund (PF) with her employer. The fund had been posting generous returns for years up until July 2018, when it posted earnings well below the inflation rate for the same period. Tehmina wanted to be financially self-sufficient in her post-retirement years and sought no financial dependence on her posterity for that matter. The meagre returns heightened her concerns about the future eventualities, so she had to decide if she should switch to another retirement plan. She needed to explore alternative retirement plans and identify how she could participate in a voluntary pension system (VPS) outside her employer’s PF. Also, if she decided to go ahead with VPS, she had to decide which asset management company(s) and portfolio manager(s) to allocate her savings to. The case comprehensively discusses the details about different retirement benefits and mechanisms and distinguishes aspects of private and public sector retirement plans in Pakistan. Most importantly, the case includes data on the performance of seventeen out of a total of nineteen pension plans operating in Pakistan. It also includes data on asset allocations of pension funds; overall macroeconomic, historical and stock market performances; and yield curve for the last 10 years.

The growth conditions of voluntary pension savings and participation activity of the population in non-state pension provision in the Russian Federation

The growth conditions of voluntary pension savings and participation activity of the population in non-state pension provision in the Russian Federation

Instytucjonalne wykluczenie emerytalne w wąskim ujęciu jako rodzaj wykluczenia finansowego w Polsce

Problematyka wykluczenia finansowego stanowi istotny obszar badań we współczesnej nauce finansów głownie ze względu na poważne skutki jakie zjawisko to implikuje zarówno w makro (dla gospodarki, sektora finansowego), jak i mikro skali (dla konsumentów usług finansowych). Obserwując zmiany w demografii (wydłużanie się życia, starzenie społeczeństw) oraz spadek prognozowanych stóp zastąpienia w bazowych systemach emerytalnych szczególnego znaczenia nabiera kategoria wykluczenia emerytalnego, polegająca na ograniczonym dostępie jednostek do produktów emerytalnych. Celem artykułu jest określenie istoty i miary wykluczenia emerytalnego oraz próba kwantyfikacji tego zjawiska w Polsce w latach 2006-2017. O oryginalności opracowania stanowi autorska definicja instytucjonalnego wykluczenia emerytalnego w szerokim i wąskim ujęciu, a także podjęta próba pomiaru instytucjonalnego wykluczenia emerytalnego w wąskim ujęciu obejmująca analizę zmian liczby uczestników dobrowolnych programów emerytalnych, wskaźników penetracji poszczególnych programów emerytalnych, oraz odsetka osób aktywnych ekonomicznie, nie korzystających z produktów emerytalnych.

How Does Households' Wealth Affect Portfolio Choices?

Purpose: The aim of this paper is to identify the determinants of households’ preferences regarding financial asset allocation. It investigates the structures of households’ financial asset portfolios in 15 euro area countries. It assumes three risk classes and presents a comprehensive picture of an average portfolio at the domestic and euro area levels. Methodology: The research is based on the Eurosystem HFCS data. It applies the fractional multinomial logit model which allows analysing parallel movements in all shares of portfolio components resulting from the changes in households’ wealth. Findings: The results obtained allow drawing conclusions about the heterogeneity of households’ investment preferences on the financial markets across the euro area. However, in all analysed member countries, deposits can be perceived as a component of primary importance as well as a substitute to voluntary pension plans and whole life insurance contracts. The results from the fractional multinomial logit model lead to a general finding that wealthier households are more open to risk exposure than those less affluent. The most useful wealth measures regarding the aim of the study were net wealth, total financial assets, and annual gross incomes. Their adoption to the model allowed identifying the countries like France, Finland, or Italy where the effect of the deepening changes in portfolio structure caused by the continuous increase in households’ wealth was identified. Additionally, Austria, Finland, France, and Italy were recognised as the member states of the most significant differences in this regard between the most distant classes of households - the poorest and the most affluent. Practical implications: This study allows cross-country comparison of the investment preferences of the households characterised by similar financial standing. The results obtained are relevant to the discussion on households' portfolio choices, and growth potentials of the retail financial market in the euro area. Originality/Value: The main contribution of this study to the literature is the knowledge on how the differentiated wealth of the euro area households influences the risk profiles of their financial asset portfolios.

Sovereign Wealth Funds: Russian and International Experience

Taking the Russian and the International experience, the principal aim of this study is to analyse sovereign wealth funds critically. It remains well known that the Russian National Wealth Fund is vital in the macroeconomic policy of the Russian state. After the abolition of the Reserve Fund in 2018, the Russian National Wealth Fund has to solve a wide range of tasks. In this context, one can argue that the sovereign welfare fund is a specialised monetary fund used to stabilise the state budget when government revenues decline. The welfare fund is also used to finance government needs in the long-term period. The role of sovereign wealth funds is growing in the world. They accumulate large amounts of financial resources. Sovereign wealth funds are founded in such countries where the budget strongly depends on market factors. In most cases, these factors are global commodity prices. The funds’ money is used to cover the deficit of the relevant budget in case of unfavourable market shifts. In the period of high commodity prices, the fund accumulates an excess of export earnings. Against this backdrop, the key purpose of the study is to evaluate the efficiency of managing the National Wealth Fund in the Russian Federation. The study was carried out using the methods of synthesis, analysis, economic analysis, as well as graphic methods, and the methods of comparisons and analogies, which in turn helps in evaluating the extent of efficiency of managing the Russian National Wealth Fund.. The research findings can be used when developing an investment strategy (investment portfolio) of the Russian National Wealth Fund, through which it can aim at balancing the insurance pension system, financing of the federal budget deficit, and co-financing of voluntary pension savings. In this regard, it is imperative for the fund to perform in productive investment activities.

ANALYSIS OF ECONOMIC-FINANCIAL EXPERIENCE OF THE WORLD COUNTRIES IN THE SYSTEM OF PENSION INSURANCE

The purpose of this article is to analyze the experience of pension insurance systems in Europe, Asia, North and South America, Australia. The defining feature is that the existing pension insurance system in Ukraine does not perform its main task properly, since the rate of pension, for the most part, does not make it possible to maintain a decent standard of living for current pensioners. After analyzing the implementation of the pension reform in Ukraine, it should be emphasized that during the twelve-year period after the pension reform in the country there remain a number of unresolved issues regarding the pension provision of citizens, namely: aging of the population, which is one of the main factors that prompt the government to a new stage of reforming the pension system; the presence of arrears on contributions to compulsory state pension insurance; lack of proper differentiation of pension payments; shadow wages; lack of sound financial instruments for investing pension assets; unsatisfactory level of legal and financial awareness of the population in matters of pension provision; lack of interest of employers in financing non-state pension programs for employees, lack of confidence in the pension system of non-state pension funds. Methods. In most countries of the world, the problems of the pension system, same to what we have in our country, arose. But due to pension reform, they achieved successful results. Each country chose its own way of building a pension system based on its own demographic and socioeconomic features. However, despite this, the main task of any pension system is to secure from poverty and provide a pension that could guarantee a decent standard of living for a pensioner. Results. Ukraine is trying to build the pension insurance system, drawing on the best practice of the countries studied. Practical implications. It is found that the most effective and successful model of the pension system is considered to be Chilean, since the country has been using cumulative and voluntary pension systems for a long time, which are priority and allow to resolve the pension of their citizens financially, prudent and efficient investing of pension funds with lower rates of public investment income. The same model was taken as the basis in Peru, Argentina, Colombia and Kazakhstan. Value/originality. Analyzing the pension reforms implemented in Eastern Europe, it should be noted that part of the changes was due to the need to protect pensioners from poverty in the context of a sharp decrease in the rate of pensions because of the reduction of total pension contributions and the inability of the state to finance previous pension obligations. The real way to reduce the financial burden on employers and the state in the context of a solidarity pension system was to develop levels II and III of the pension system. It is noteworthy to study the foreign experience of the Eastern European country, such as Poland, which was one of the first to introduce a compulsory funded pension system.