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    “Sustainable and Affordable”? Actuarially fair contribution rates for the USS Pension Scheme

    Hori, Kenjiro and Wright, Stephen (2019) “Sustainable and Affordable”? Actuarially fair contribution rates for the USS Pension Scheme. Working Paper. Department of Economics, Mathematics and Statistics, London, UK. (Submitted)

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    Abstract

    We compute actuarially fair contribution rates (aggregating both employers’ and employees’ contributions) for the USS pension scheme, using UK life tables and market yield curves. The fair rate is sensitive to life expectancy and the level of real yields, neither of which appears stationary. So any scheme predicated on a constant contribution rate is inherently unstable. We therefore argue that, to survive, defined benefit schemes such as USS must explicitly incorporate time variation in contribution rates, ideally along with some dependence on individual characteristics. Our formulae in principle provide an objective, verifiable and implementable methodology to calculate such fair contribution rates

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 1901
    Keyword(s) / Subject(s): defined benefit, pension contribution rate
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 14 Mar 2019 13:55
    Last Modified: 28 Jul 2019 03:33
    URI: http://eprints.bbk.ac.uk/id/eprint/26674

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