Thesis advisor: Alicia H. Munnell / Retirement plans for state employees have over $2 trillion in assets, a significant portion of the U.S. retirement market. In the last 10 years, seven states have transitioned their employee retirement plans from traditional annuity-providing defined benefit pensions to individual account-style defined contribution plans. While private-sector employers save money in transitioning to a defined contribution plan, states actually lose money when switching. Why state governments choose to sponsor retirement plans that cost both the state and its employees money is the central question of this study. Several financial and demographic variables are considered; the only variable that cannot be ruled out is political ideology. The probit panel regression finds that states with Republican-controlled governments are far more likely to switch to a defined contribution plan than states with mixed or Democrat-controlled governments. This conclusion illuminates the central importance of unions in the political process of public plan decision-making and reveals the importance of potential economics losses that result from sponsoring defined contribution plans. / Thesis (BA) — Boston College, 2006. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics. / Discipline: College Honors Program.

Seen from the viewpoints of politics and administration, the retirement system of civil servant is related to the overall planning and flexible utilization of human resource, the improvement of national competitiveness and the collocation of financial resource of a country; seen from the viewpoint of economy, the prosperity or depression of national economy closely affects the planning of retirement payment system; in the aspect of society, as the aged society comes earlier than expected and the social structure changes, the retirement system of civil servant is related to whether the living security and social welfare system for the aged people is sound enough. Through the proper and reasonable retirement payment, the retirement system of civil servant is intended, firstly, to motivate the civil servants to be satisfied with the job and work hard for the public; secondly, to provide a reasonable income for the civil servants and guarantee their life in the years after retirement; and thirdly, with the reasonable retirement payment mechanism and the social security mechanism of the country, to construct a complete social security system network and build a safe and peaceful society in which all people can make their own livings. The implementation of the new pension system has really improved the problems faced in the old public finance-based pension system, and has laid a solid foundation in stabilizing the source of pension fund and establishing the civil servants' concept of being prepared to burden their post-retirement life when they are on the job. However, the current retirement system was designed more than 20 years ago and some tradeoff or progressive measures were taken for the purpose of reducing the resistance in the beginning of implementation. As the age and the environment both have changed, some provisions of the pension system have been behind the time. Therefore, it is really necessary to research how to manage and operate the retirement system, think over the problems in the current retirement system of civil servant, and research how to build a better retirement fund system and balance the retirement benefits of the civil servants of different generations. In this thesis, the legal system of retirement of civil servant is the subject of research and the other related administrative legal provisions are used for explanation, and the basic theories of administrative law ¡V administrative principles, administrative organization, administrative authority, administrative remedy, and administrative supervision, are used as the research methods to review the retirement system of civil servant in Taiwan. Through the research it is found that, the average age of Taiwanese people has been higher and a lot of civil servants choose to retire earlier for they can receive monthly pension for a long time; this is likely to deteriorate the governmental finance. How to solve this problem efficiently and reasonably, relieve the accumulation of retirement cost and avoid it from being transferred to the later generations as a heavy burden, maintain the existing rights and benefits, provide a reasonable guarantee for the original expectation of civil servants and distribute the national resources reasonably? It is necessary for us to think about for planning a reasonable legal system of retirement.

This thesis studies three asset allocation strategies under a defined-contribution pension plan: Buy-and-hold (BH), constant mix (CM), and time-invariant portfolio protection (TIPP). First in this paper, the actuarial assumptions follow Frees et al (1998), as well as Chang and Lin (1999): the age of the beneficiaries is between 25 to 65 and follows the uniform distribution. As to the investment environment, the portfolio includes a risk-free asset, certificate deposit (CD), and a risky asset--the stock. The interest rate of CD is fixed and the return of stock varies according to 14 scenarios. Then the concept of an open-ended fund is applied to compute the NAV (Net Asset Value) of three strategies for each month and a model of defined-contribution pension funds was developed. Moreover, this thesis also discussed the relationship between the trends of the stock and the changes of stock weights, as well as the terminal wealth of pension fund and the income-replacement ratio under each asset allocation strategy. The characteristics and timing of each strategy can be investigated clearly. Finally, the input parameters derived from the data of historical stock market in Taiwan is used to implement Monte Carlo simulation so that the study of the performance of asset allocation strategies can go more close to reality. The endeavor and results of this thesis will be a useful reference to facilitate both the government and private sector to manage the pension fund.

To establish the pension system is to ensure the life of old men. To compare the other pension systems of main countries, the old-aged economics security should adopt three-pillar system in Taiwan. This thesis puts emphasis on the empirical study of the importance of Taiwan pension fund asset allocation and attempts to develop a proper process of asset allocation decision as the reference of the pension fund sponsors when they are dealing with this task. The process of asset allocation decision could be divided into two parts: forming the efficient frontier and selecting the optimal asset allocation. This research suggests the readers to use quadratic programming techniques, which is introduced by Markowitz in 1956, to calculate the efficient frontier. With the changes in the financial situation and the coming of new information, pension fund sponsors should re-perform the process of asset allocation decision periodically to obtain the updated optimal asset allocation. The result of putting restrictions on the ratio of investment items is that the limited portfolio will reduce the utility and return relatively. As for raising the ratio of current assets, the standard doesn¡¦t increase obviously. To impress that pension fund should be in accordance with its need and object to keep appropriate current assets. Furthermore, pension fund sponsors should raise the weight of stocks and bonds to improve the performance. Pension fund sponsors who entrust risky assets to the professional institutions to manage will enhance the performance of investing, but we can¡¦t obtain the data of risk. In the future, the performance should be measured continually and join the risk to analyze.

This DBA thesis is an empirical study of the new private pension programme in Thailand, an Employee’s Choice (EC) programme, which is structured as a self-directed defined contribution plan that permits workers to make their own investment decisions for their pension assets. The growing acceptance of the new pension programme is placing greater responsibility for managing pension assets on workers. The shift from committee-directed pension plans to self-directed pension plans has meant that Thai workers now must make investment decisions, such as what type of plan to choose and how to allocate their pension assets among different asset classes. This raises some concerns about the financial literacy of workers and their ability to make informed decisions. This study aims to analyse the effectiveness of this programme by examining empirical evidence from a case study. Specifically, it asks whether workers are able to make appropriate investment decisions for their pension plans as investment theory has suggested. This study has shown that the new pension programme in this case study is effective. Most importantly, the study finds that, regardless of their level of financial literacy, workers are able to make reasonable investment choices as suggested by portfolio and lifecycle investing theories. Specifically, when workers were offered investment options ranging from low risk to high risk, workers are able to choose investment choices consistent with their age and risk tolerance. However, this study finds that financial literacy does matter if workers are asked to make asset allocation decisions instead of choosing between options. The study finds that workers with low levels of financial literacy are likely to allocate less of their pension assets in equities. The findings from this study make several contributions to the growing literature on household finance. In addition, this study has a number of important management implications for pension design. With the simple plan design which offers choices ranging from low risk to high risk, workers appear to make rational investment decisions regardless of their level of financial knowledge. Therefore, the simple plan design could be very useful for workers who have less financial knowledge. This research has also shown that many workers do not plan to review or revise their portfolios as lifecycle theory has suggested. The implication from this study is that the new self-directed pension programme is not effective in the long-run. There is, therefore, a definite need for a better pension design. Innovative pension design should be used in order to minimize workers’ investment mistakes. This study advocates the use of lifecycle funds and recommends policymakers to promote and support the usage of lifecycle funds in the Thai private pension context.

Over the past three decades, employer-sponsored 401(k) plans have grown in popularity as they have proved to be a valuable benefit employers can provide to employees and tax-deductible expense that employers can easily account for on their books. However, a major concern around these plans is that they have come to take the place of traditional pension plans offered by employers, forcing employees to assume full responsibility for their retirement savings. This paper evaluates the overall effectiveness of 401(k)s at the top 50 companies in the Fortune 100, examining participation rates, account balances, and employer contributions. It concludes that employees that have 401(k)s at these 50 companies fare much better than the average American with regard to retirement savings. Nonetheless, the substitution of traditional pensions with 401(k) plans by companies in the United States is problematic. Employees, which previously could rely on a company pension in retirement, are unintentionally delaying retirement due to a lack of savings. Furthermore, a growing number of workers without retirement savings will certainly put a strain on Social Security funds in the coming decades.

In October 2012, the United Kingdom adopted nation-wide automatic enrolment into workplace pension schemes. Automatic enrolment on the current scale is a major undertaking but it is also an untested policy and it is important that we understand how individuals are adapting to these radical changes in pension provision. There is currently a lack of research into the dynamic decision-making processes that lie behind some individuals' deviation from workplace pension scheme default settings. This exploratory study investigates the importance of financial planning, social relations, and the role of the employer to default adherence and deviation. The embedded case study comprises qualitative interviews with 25 middle-income employees of a large UK utility company. Participants were selected on the basis of socio-economic similarity but had variable behavioural responses to the default settings of their workplace pension scheme. The study uncovered different motives underpinning individuals' reaction to membership defaults, contribution defaults, and investment fund defaults. Continued membership following automatic enrolment was driven by social pressures. Subsequent to enrolment, individuals tried to achieve a balance between current expenditure and saving for retirement. Property ownership and mortgage debt redemption were prioritised over additional pension scheme investment. The life-stage of the individual influenced how they reacted to the contribution default settings - default adherence appeared to be linked to unsettled personal lives and career insecurity. Motives for increasing contributions were household formation, parental ageing, and relationship breakdown. Saving strategies were influenced by parental accumulation of retirement assets and parental financial literacy. Employer-matching contributions were implicated in participants' willingness to increase pension contributions beyond the minimum default; investment in share option schemes was offered as justification for limiting contributions to the maximum match. Employer endorsement effects, driven by trust in the employer's intentions, were strongly implicated in fund default adherence and in investment diversification strategies: participants pointed to the employer's promotion of the pension scheme and employer-provided financial seminars. Advice from older colleagues was also cited as influential in directing retirement savings behaviour. The research concludes that the employment context is crucial to understanding how middle-income employees react to the default settings in their workplace pension scheme.

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The research investigates the application of asset allocation model to pension structure and mortgage payment. The defined contribution pension plan has become the main pension plan in Taiwan. In this pension plan, labors could adjust the contribution rate to maximize their utility function even if they change jobs. Thus, the pension plan may cause changes in their optimal asset allocation. In addition, due to the financial innovations of personalized debt instruments, lenders are allowed to adjust the mortgage payment to maximize personal utility function and hence the adjustable payment ratio could also change the lenders¡¦ optimal asset allocation. This study presents an extended intertemporal asset allocation model of Campbell(1993) and Viceira(2001) to investigate the effects of defined contribution pension and mortgage payment. The numeric simulation is also present to demonstrate the effects on labors¡¦ optimal asset allocation.

This thesis provides a range of analyses to examine the current Chinese pension reform in both provincial and national contexts, with special emphasis on coverage increase and its long term financial implications. Quantitative assessment includes econometric analysis of survey data initiated and organized by the author and her colleagues. Special models are designed to reflect the transitional characteristics of the current Chinese pension system. The results confirm that the coverage increase delays the system-aging process, through labor migration and urbanization, by about 20 years. But a funding crisis is inevitable if no parametric reforms could be made in the current system and if the system is not well managed. Policy suggestions are made in line with the empirical analysis and model results. In addition, some structural pension reform options are discussed. Two Notional Defined Contribution (NDC) applications are presented and simulations indicate that an NDC system may be effective in smoothing the financial pressure for government while maintaining adequate levels of individual retirement benefit. In the final part of the thesis, a hypothetical safety net is assessed in the context of the current policy framework, and its cost is examined. The thesis introduces new data and first hand information about Chinese pension reform in a provincial context to reflect the features of the national system.