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Integrating retirement and permanent disability in NDC pension schemes

Year: 2015

Type: article

Abstract: In this paper we develop a theoretical basis for integrating retirement and permanent disability using a generic NDC framework. The methodology used relies on a multistate overlapping generations model that includes the so-called survivor dividend. Currently this feature can only be found in the Swedish defined contribution (DC) scheme. The results achieved in the numerical example we present endorse the fact that the model works well. Special attention is given to the assumptions made about mortality rates for disabled people and disability incidence rates, which largely determine the contribution rate assigned to disability. The model could be of interest to policymakers because, after some adaptations, it could be implemented without too much difficulty and would uncover the real cost of disability and minimize the risk of disability insurance being used as a vote-buying mechanism.

Source: Applied Economics

DOI: 10.1080/00036846.2015.1093084

Authors: Manuel Ventura-Marco, Carlos Vidal-Meliá

Institution: Universitat de València

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funder: Ministerio de Economía y Competitividad

Award: G244420857