actuarial sciences , Mathematical Sciences , shahid beheshti university , tehran
Abstract
Over the last two decades, the debate on the nature and reform of public pension systems with the financial system of PAYG has grown in the world. Many countries have reformed their public retirement system based on the social, economic and demographic changes. One of the reforms used for the PAYG pension system is the Automatic Balancing Mechanism. When there is a demographic risk such as decrease of labor and economic risks such as a financial deficit, the mechanism is applied to the system to restoring liquidity and sustainability of the system in the long run .
The aim of this research is to study an automatic balanced mechanisms to restore the liquidity and sustainability of a PAYG pension system based on changes in its main variables, such as the contribution rate, normal retirement age and indexation of pensions. Using nonlinear optimization methods, this mechanism, determines and applies optimal values of this essential parameters in the long run by assessing demographic changes. The results have been applied to the data from the Iranian Social Security Organization.
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