Inmaculada Domínguez-Fabián

Notional Defined Contributions (NDC): Solvency and Risk in Spain

The aim of this article is twofold: to demonstrate the actuarial imbalance in the Spanish pension system in its current form; and to measure the degree of aggregate economic risk to which pensioners are exposed when applying formulas for the calculation of retirement pensions based on notional accounts. The model used generates scenarios for various periods encompassing some 10,000 different permutations of the macroeconomic indices needed to calculate such parameters as initial pension, earnings replacement rate, or internal rate of return and value at risk. The findings are analysed both objectively and subjectively. The main conclusions are that if the projections for the macroeconomic indices used bear only a minimal resemblance to reality, the pension system will accumulate further financial imbalance in the future that will force it either to reduce initial pensions considerably or to make some radical adjustments to the parameters. In terms of risk, for beneficiaries with high risk aversion the preferred formulas would be those based on future variations in wages with a constant pension amount in real terms; on the other hand, those less averse to risk would prefer formulas that generate a smaller initial pension but one which grows in real terms with subsequent changes in wage levels.

Fair valuation of various participation schemes in life insurance

Fair valuation is becoming a major concern for actuaries, especially in the perspective of IAS norms. One of the key aspects in this context is the simultaneous analysis of assets and liabilities in any sound actuarial valuation. The aim of this paper is to illustrate these concepts, by comparing three common ways of giving bonus in life insurance with profit: reversionary, cash or terminal. For each participation scheme, we compute the fair value of the contract taking into account liability parameters (guaranteed interest rate and participation level) as well as asset parameters (market conditions and investment strategy). We find some equilibrium conditions between all those coefficients and compare, from an analytical and numerical point of view, the systems of bonus. Developments are made first in the classical binomial model and then extended in a Black and Scholes economy.

The Gender Gap of Retirement Pensions in Spain, Causes and Improvements in the Legal Order

Despite the progress made, the gender gap in the labour market and in the Social Security System continues to be a pending issue of improvements for all the Spanish society. The objective of this paper is to analyse the part-time work situation in Spain and the gender gap that this may imply for pensions, as well as the regulatory changes and good practices developed in the Spanish legislation to reduce the gap. The analysis is developed from the Living Conditions Survey (LCS, 2013–2016) of the INE (National Institute of Statistics). The data show the gender inequalities in the labour market; unemployment, part-time work and inactivity are more present throughout women’s working lives, which causes lower salaries and time contributed, and therefore, greater difficulties to access to contributory retirement benefits.

A Two-Steps Mixed Pension System: An Aggregate Analysis

The change in the economic and sociodemographic context, framed by a continuous increase in longevity, the consequences of the economic crisis as well as the lack of adequate adjustments of the Social Security retirement pension systems everywhere, entail risks for workers and for the Social Security itself. Against the background of the change in agents’ behaviors throughout the life cycle and the presence of an adverse selection problem in the annuities market, we describe in this paper a ‘two-steps mixed pension system’ that tries to solve the pressure that increasing longevity is putting on conventional pension schemes to provide adequate and sustainable pensions for all. In our proposal, Social Security, preceded by a term-annuities scheme, is ‘reinvented’ to continue to ensure retirees’ incomes from their ‘grand age’ onwards.