A reforming trend is captured showing that countries are shifting from defined benefit pension systems towards defined contribution systems. The reforms have been justified through predictions that the defined benefit systems will not manage to provide good enough pensions to members in the future. The newer defined contribution pension plans often include individual financial accounts where individuals have the possibility to choose how a part of their pension savings should be invested. Sweden was early to introduce such a system, which at the moment provides more than 800 funds to choose from. The aim of this thesis is to capture the market risk associated with these individual investments and does so by using Monte Carlo simulations for six selected pension funds. The method produces forecasts of replacement ratios, pension as percentage of pre-retirement income, for two hypothetical individuals: one who starts to work right after elementary school and one individual who starts a five year education and after graduation starts to work. The results show a slightly lower replacement ratio for the educated individual, which also is associated with a higher probability of ending up with a low replacement ratio. The market risk also varies between the funds, which implies that the funds should be chosen with great care. The study ends with arguments for an increasing paternalism with a carefully considered fund offering, providing fewer funds to choose from than today.

The research set out to explore the nature of challenges in distribution of old age pensions in Lesotho. Poor institutional capacity failed the implementing agency, the Department of Pensions; to set up competent administrative structures to run run the pensions effectively and efficiently. A number of challenges have been identified, some of which were: inadequate supervision of the paying officers, fraud by workers and community agents, missing funds, insufficient resources, inadequate administrative capacity, overworked employees, faulty targeting, soft and discriminatory approach to non-compliance with rules and multiple use of identity documents by recipients. On the other hand, a number of opportunities have been identified to counteract the challenges. The main recommendation of the study was the engagement of mobile phone-based money transfer facilities to transfer the old age pensions from the government to the recipients. The Department of Pensions should make use of baseline database like information from civil registration agency like the Ministry of Home Affairs to confirm the validity of the pension recipients. Other recommendations included moving the division of old age pensions from the Pensions Department to the Ministry of Social Development which is the controlling body for other forms of social grants in Lesotho. The Ministry of Social Development is regarded as well equipped with qualified staff and facilities to deal with vulnerable people like the elderly.

Ph.D. (Finance) / The majority of private pension plans offered by employers are defined contribution plans where the risk is borne by the member. In a member-directed pension plan, the individual members need to make decisions regarding the investment of their contributions. The board of trustees usually provide them with a number of options to choose from. This research answers the question: which factors influence the investment decisions of members of member-directed defined contribution pension plans? The study makes a unique contribution to the field of retirement finance by determining the impact of financial risk tolerance, demographics, behavioural factors, and pension plan design and presentation factors on the investment decisions of members of a member-directed defined contribution pension plan. The results of the study inform a number of role players in the pension value chain to ultimately aid the pension plan member to effect a more optimal investment choice. A survey approach was followed to collect primary data to analyse together with secondary data within a quantitative research paradigm. A census was conducted on individuals who were members of the member-directed defined contribution pension plan of a South African higher education institution on 31 March 2008. A structured questionnaire was used to collect data on members’ demographics, financial risk tolerance, behavioural factors, and pension plan design and presentation factors. Secondary data consisted of additional demographic factors, which were available on the employers’ information system and data on member investment decisions obtained from the administrators of the pension plan. Of the 879 survey instruments distributed, 620 were returned at least partially completed and could be used in the study.

The issue of increasing unfunded pension liabilities of state and local governments has drawn increasing attentions in the last few years, especially after the 2008 stock market downturn. To maintain sustainability many state and local governments have put public pension reform at the top of their priority list. Previous research and practices provide two strategies to reform the current pension systems: Incremental changes to amend the existing defined benefit plans (DB plans), and the pension model switch from the DB model to defined contribution plans (DC plans). This study aims to uncover reform strategies to cope for public pension systems. It first examined the appropriateness of the incremental reform strategies by identifying the determinants of the financial solvency of DB plans, utilizing the existing panel data of 151 local DB plans in Florida municipalities. Second, it gathered the primary data through the surveys and interviews with the Finance and HR directors in Florida local governments to analyze their perceptions of public pension reform and reveal their readiness to conduct the public pension paradigm switch. These approaches revealed the critical interperiod equity issue along with the impact of the two-tier benefit structure during the recent pension reform. The results suggest that incremental reform strategies that reduce benefits and increase contributions are not effective in improving the financial solvency of public DB plans. The alternative reform approach—the DB-to-DC transition—is attractive to local governments because it will relieve the employer of the pension cost burden and transfer the investment risk to employees themselves. The transition is also politically palatable because the taxpayer sentiment is not supportive of what are perceived to be generous retirement benefit of public employees. Meanwhile, local governments are hesitant to implement the paradigm switch due to prohibitive transition costs, political pressure, and perhaps more importantly, the potential negative impacts to public recruitment and retention. Local officials do not perceive a reduction of morale with the two-tier benefit structure at the present time; they believe this issue will solve itself along the retirement of senior employees.

The growth of the mutual fund industry and the accompanying competition among intermediaries should lead to progressively lower costs to shareholders, based on economic theory. This dissertation is comprised of three studies which examine shareholder costs among mutual funds to test this theory. In each study the expense ratios of mutual funds are examined, while one study also includes an examination of commission structures. In Essay 1, the effect of participation in a supermarket No Transaction Fee program on a fund’s expense ratio is examined. In addition, the change in characteristics of these participants during a difficult market period is studied. Essay 1 finds that NTF participation leads to higher initial expense ratios but that continued participation depends on the program’s ability to pay for itself. In Essay 2, market segmentation within the fund industry is examined for this same time period. Essay 2 finds increased market segmentation over a five year period and finds evidence of competitive pricing only among certain segments. Retail investors who invest in no-load funds appear to benefit from competitive pricing more than those who pay commissions. There is evidence of cost shifting during this time period, as funds lower expense ratios but increase commissions. In Essay 3, expense ratios of common funds within state-sponsored defined contribution plans are examined. Essay 3 finds evidence of market segmentation among the various states. Plan size may have some effect on the setting of expense ratios, but the effect does not appear to be economically significant. Number of participants has no significant effect on the expense ratio. State population displays some significance, such that funds actually charge more for larger states. Wealth of the state, on the other hand, may result in lower expense ratios. Overall, competitive pricing within the mutual fund industry is limited to certain market segments and may be dependent on the channel of distribution.

This thesis examines stabilizing mechanisms in social security retirement systems (“SSRS”), especially those purporting to be automatic balancing mechanisms (“ABM”). It develops a consistent approach to identifying whether an ABM is robust, partial or transitory and establishes a terminology to classify balancing mechanisms. Both financial and equitable balances are considered in assessing whether an ABM achieves balance. Families of definitions of equity are presented and a benchmark by which to measure equitable balance is defined and applied. The balancing mechanisms of Canada, Germany, Japan and Sweden are described, evaluated and classified. None of these mechanisms are found to be robust. This thesis provides a critical analysis of an approach referred to as integration to financial markets and the approach is found to be deficient. In analyzing the Swedish SSRS a critical error in the way assets are calculated is identified and a suitable correction is proposed. A further weakness in the application of the Swedish ABM is identified that means that once an imbalance occurs, balance is unlikely to be restored. The thesis also discusses some of the unusual characteristics of the steady-state contribution rate calculation for the Canadian SSRS and shows that although it has limited application and does not appear to depend on any actuarial principle, the steady-state contribution rate calculation creates a tension between the near and distant future, which is a factor in achieving financial balance over a seventy-five year horizon. With respect to the balancing mechanism in the Canadian SSRS, the thesis proposes a change in how the mechanism is defined so that the mechanism would be robust, within certain ranges.

This thesis examines stabilizing mechanisms in social security retirement systems (“SSRS”), especially those purporting to be automatic balancing mechanisms (“ABM”). It develops a consistent approach to identifying whether an ABM is robust, partial or transitory and establishes a terminology to classify balancing mechanisms. Both financial and equitable balances are considered in assessing whether an ABM achieves balance. Families of definitions of equity are presented and a benchmark by which to measure equitable balance is defined and applied. The balancing mechanisms of Canada, Germany, Japan and Sweden are described, evaluated and classified. None of these mechanisms are found to be robust. This thesis provides a critical analysis of an approach referred to as integration to financial markets and the approach is found to be deficient. In analyzing the Swedish SSRS a critical error in the way assets are calculated is identified and a suitable correction is proposed. A further weakness in the application of the Swedish ABM is identified that means that once an imbalance occurs, balance is unlikely to be restored. The thesis also discusses some of the unusual characteristics of the steady-state contribution rate calculation for the Canadian SSRS and shows that although it has limited application and does not appear to depend on any actuarial principle, the steady-state contribution rate calculation creates a tension between the near and distant future, which is a factor in achieving financial balance over a seventy-five year horizon. With respect to the balancing mechanism in the Canadian SSRS, the thesis proposes a change in how the mechanism is defined so that the mechanism would be robust, within certain ranges.

O objetivo deste trabalho é verificar o impacto na alteração do regime previdenciário de repartição para um modelo misto, através da criação do fundo complementar previdenciário para os novos servidores federais no Brasil. O estudo apresenta os diagnósticos e os conceitos e modelos de previdência adotados no Brasil e sintetiza as experiências de países latino-americanos que reformaram seus respectivos regimes previdenciários com a finalidade de reduzir o déficit com os inativos. No caso brasileiro, após a promulgação da Constituição Federal de 1988 foram editadas duas Emendas Constitucionais (a de nº 20 de 1998 e a de nº 41 de 2003) que possibilitaram a criação, em 2012, da entidade fechada de previdência complementar, para os novos servidores públicos federais, chamada FUNPRESP. O estudo conclui que com o surgimento deste fundo, será possível equalizar os valores dos benefícios pagos entre os regimes geral e próprio. Nesse sentido, o teto dos benefícios de aposentadorias pagos do regime próprio dos servidores federais estará indexado ao valor do teto do regime geral de previdência social. Assim, caso o servidor decida suplementar ganhos acima deste teto, para fins de aposentadoria, ele deverá aderir ao fundo e contribuir, sobre o salário participação, em uma conta individualizada. Desta forma, o governo buscou garantir equidade nos pagamentos de benefícios entre os regimes de previdência geral e próprio, além de tentar reduzir o déficit das contas públicas previdenciárias no longo prazo. / The objective of the present paper is to check the impact on changing from the actual social security of federal pensions to a mixed model, through a creation of a defined contribution pension plan for new federal public employees in Brazil. The study show off diagnostics and exhibit the concepts of pension models adopted in Brazil and brief international experiences of countries that have altered their social pension schemes in Latin America, with object to reduce government deficits of inactive. In the Brazilian case, after the Federal Constitution of 1988, Constitutional Amendments were enacted (nº 20 of 1998 and nº 41 of 2003) which enabled the creation, in 2012, of a complementary retirement plan for new federal public employees, called FUNPRESP. The study concludes than with the emergence of this fund, it will be possible to equalize the amounts of benefits paid between pension schemes. Thereby, the remuneration limit of the benefits paid to the actual system of federal employees pensions will be indexed to the remuneration limit of the general social security. Therefore, if the public employee decides complement gains above this compensation limit, for pension purposes, they should choose to contribute with a quota to an individualized pension plan. So, the government tried to ensure equity in benefit payments between the pension schemes, as well as tried to reduce the deficit of the social security public finances in the long term.

Thesis (Ph.D.)--Mississippi State University. Department of Finance and Economics. / Title from title screen. Includes bibliographical references.

O objetivo deste trabalho é verificar o impacto na alteração do regime previdenciário de repartição para um modelo misto, através da criação do fundo complementar previdenciário para os novos servidores federais no Brasil. O estudo apresenta os diagnósticos e os conceitos e modelos de previdência adotados no Brasil e sintetiza as experiências de países latino-americanos que reformaram seus respectivos regimes previdenciários com a finalidade de reduzir o déficit com os inativos. No caso brasileiro, após a promulgação da Constituição Federal de 1988 foram editadas duas Emendas Constitucionais (a de nº 20 de 1998 e a de nº 41 de 2003) que possibilitaram a criação, em 2012, da entidade fechada de previdência complementar, para os novos servidores públicos federais, chamada FUNPRESP. O estudo conclui que com o surgimento deste fundo, será possível equalizar os valores dos benefícios pagos entre os regimes geral e próprio. Nesse sentido, o teto dos benefícios de aposentadorias pagos do regime próprio dos servidores federais estará indexado ao valor do teto do regime geral de previdência social. Assim, caso o servidor decida suplementar ganhos acima deste teto, para fins de aposentadoria, ele deverá aderir ao fundo e contribuir, sobre o salário participação, em uma conta individualizada. Desta forma, o governo buscou garantir equidade nos pagamentos de benefícios entre os regimes de previdência geral e próprio, além de tentar reduzir o déficit das contas públicas previdenciárias no longo prazo. / The objective of the present paper is to check the impact on changing from the actual social security of federal pensions to a mixed model, through a creation of a defined contribution pension plan for new federal public employees in Brazil. The study show off diagnostics and exhibit the concepts of pension models adopted in Brazil and brief international experiences of countries that have altered their social pension schemes in Latin America, with object to reduce government deficits of inactive. In the Brazilian case, after the Federal Constitution of 1988, Constitutional Amendments were enacted (nº 20 of 1998 and nº 41 of 2003) which enabled the creation, in 2012, of a complementary retirement plan for new federal public employees, called FUNPRESP. The study concludes than with the emergence of this fund, it will be possible to equalize the amounts of benefits paid between pension schemes. Thereby, the remuneration limit of the benefits paid to the actual system of federal employees pensions will be indexed to the remuneration limit of the general social security. Therefore, if the public employee decides complement gains above this compensation limit, for pension purposes, they should choose to contribute with a quota to an individualized pension plan. So, the government tried to ensure equity in benefit payments between the pension schemes, as well as tried to reduce the deficit of the social security public finances in the long term.