This master thesis examines the possibility to improve the efficiency of the newSwedish occupational pension system. Concerns have been raised that the occupational pension system will yield unsatisfactory pensions that will cause problems for future generations. By implementing a solidarity reserve, a buffer, the market risk can possibly be mitigated, hence enabling a higher expected return for the beneficiaries. A model was created that simulates two pension plans. The first, a benchmark plan with features derived from the Swedish occupational pension system, while the second plan holds a collective solidarity reserve and increased investment risk. The model was run a large number of times over different scenarios and relevant data was extracted from each run. The data is then analyzed with respect to the efficacy of the solidarity reserve as a tool for risk mitigation and with respect to key considerations to take into account while implementing a solidarity reserve. The results from the project is that the plan that utilizes a solidarity reserve with a higher risk level yields higher mean payouts for the beneficiaries and that the two plans yield similar outcomes in adverse scenarios. Thus, the conclusion from the project is that the solidarity reserve has the potential of being a useful tool for risk mitigation. This allows a higher risk profile, which enables higher expected return for the beneficiaries. The primary consideration to take into account is the investment strategy used for the buffer and the authors propose that a hedged strategy can be successful in order to lower the correlation with the market in case of an adverse market event. The thesis also proposes a number of areas for further research, among others, a detailed study of how a solidarity reserve would function in an extremely adverse scenario. Optimization of the premium contribution levels for the buffer, the size of the buffer and the disbursement strategy of the buffer are also proposed as useful topics for further research.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-186233 |
| Date | January 2021 |
| Creators | Eriksson, Joakim, Sundström, Gustav |
| Publisher | Umeå universitet, Institutionen för matematik och matematisk statistik |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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