Pension Funds

Target-Date Funds: A State-of-the-Art Review with Policy Applications to Chile’s Pension Reform ArXiv ID: 2504.17713 “View on arXiv” Authors: Fernando Suárez, José Manuel Peña, Omar Larré Abstract This review paper explores the evolution and implementation of target-date funds (TDFs), specifically focusing on their application within the context of Chile’s 2025 pension reform. The introduction of TDFs marks a significant shift in Chile’s pension system, which has traditionally relied on a multifund structure (essentially a target-risk funds system). We offer a comprehensive review of the theoretical foundations and practical considerations of TDFs, highlighting key challenges and opportunities for Chilean regulators and fund managers. Notably, we recommend that the glide path design should be dynamic, incorporating adjustments based on total accumulated wealth, with particular flexibility depending on each investor’s risk tolerance. Furthermore, we propose that the new benchmark for generational funds should feature a wide deviation band relative to the new benchmark portfolio, which could foster a market with more investment strategies and better competition among fund managers, encourage the inclusion of alternative assets, and foster greater diversification. Lastly, we highlight the need for future work to define a glide path model that incorporates the theoretical frameworks described, tailored to the unique parameters of the Chilean pension system. These recommendations aim to optimize the long-term retirement outcomes for Chilean workers under the new pension structure. ...

Collective Defined Contribution Schemes Without Intergenerational Cross-Subsidies ArXiv ID: 2504.16892 “View on arXiv” Authors: John Armstrong, James Dalby, Rohan Hobbs Abstract We present an architecture for managing Collective Defined Contribution (CDC) schemes. The current approach to UK CDC can be described as shared-indexation, where the nominal benefit of every member in a scheme receives the same level of indexation each year. The design of such schemes rely on the use of approximate discounting methodologies to value liabilities, and this leads to intergenerational cross-subsidies which can be large and unpredictable. We present an alternative approach which we call Collective-Drawdown CDC. This approach does not result in intergenerational cross-subsidies since all pooling is performed by explicit insurance contracts. It is therefore completely fair. Moreover, this scheme results in better pension outcomes when compared to shared-indexation CDC under the same model parameters. ...

The Conundrum of the Pension System in India: A Comprehensive study in the context of India’s Growth Story ArXiv ID: 2309.06353 “View on arXiv” Authors: Unknown Abstract India is the largest democracy in the world and has recently surpassed China to be the highest-populated country, with an estimated 1.425 billion (approximately 18% of the world population). Moreover, India’s elderly population is projected to increase to 138 million by 2035. Indian economy is already reeling under the pressure of exorbitant pension liabilities of the government for existing pensioners. As such, India has introduced a National Pension System (NPS), which is a Defined Contribution Scheme for employees joining government service on or after 1st January 2004, bidding adieu to the age-old, tried and tested Old Pension System (OPS) which is a Direct Benefit Scheme, in vogue in India since the British Raj. This is an epoch-making move by the government as it seeks to inculcate Disciplined Saving among the people while significantly reducing the government burden by reducing the Pension Liabilities of the Central and State Governments. This paper aims to analyse various features and intricacies of the NPS and address the claims of various stakeholders like the Central Government, State Government, Employees, Pensioners, etc. In light of the above, and taking cognisance of the fact that many states such as Rajasthan, Chattisgarh, Jharkhand, etc, have exited the NPS scheme and have sought back their share of NPS employee and employer contribution, this study is relevant to address the current economic and fiscal issues of India to propel towards the ambitious goal of becoming a $ 5 trillion dollar economy by 2025. Keywords: Old Pension Scheme (OPS), National Pension System (NPS), Direct Benefit Scheme, Defined Contribution Scheme, Pension Liabilities. ...

Are State Public Pensions Sustainable? Why the Federal Government Should Worry About State Pension Liabilities ArXiv ID: ssrn-1596679 “View on arXiv” Authors: Unknown Abstract This paper analyzes the flow of state pension benefit payments relative to asset levels and contributions. Assuming future state contributions fund the full pre Keywords: Pension Funds, Asset Liability Management, State Pensions, Solvency, Defined Benefit Plans, Fixed Income Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 7.0/10 Quadrant: Street Traders Why: The paper uses straightforward present value calculations and scenario analysis based on state-reported data rather than advanced mathematical derivations, but it is heavily data-driven, relying on extensive actuarial and financial data from state pension reports to produce specific numerical forecasts and state-by-state outcomes. flowchart TD A["Research Goal: Assess State Pension Sustainability<br> & Asset Liability Management"] --> B["Data Inputs: State Pension Fund<br>Benefit Payments, Asset Levels, Contributions"] B --> C["Computational Process:<br>Stochastic Modeling of Asset Liability Mismatch"] C --> D["Key Finding: Insufficient Contributions<br>to Fund Full Future Benefits"] D --> E["Outcome: Solvency Risk Identified<br>Requiring Federal Policy Attention"]