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Stochastic Assessments of Urban Employees’ Pension Plan of China

1
School of Economics and Management, Beihang University, Beijing 100191, China
2
COFCO Nutrition & Health Research Institute, Beijing 102209, China
3
School of Electronic Information and Electrical Engineering, Shanghai Jiao Tong University, Shanghai 200240, China
*
Author to whom correspondence should be addressed.
Sustainability 2018, 10(4), 1028; https://doi.org/10.3390/su10041028
Received: 13 March 2018 / Revised: 27 March 2018 / Accepted: 27 March 2018 / Published: 30 March 2018
In the uncertain environment of population and economy; the pension plan for urban employees in China is under threat from various types of financial risk. This paper mainly builds a comprehensive risk assessment system to evaluate the solvency sustainability of the urban employees’ pension plan of China. Specifically, we forecast annual accumulative net asset; actuarial balance; and potential support ratio for the next seventy years. To account for the impact of demographic uncertainty on long-term finances, stochastic simulations are used to estimate the probability distribution of relative risk indicators. Moreover, we integrate the Lee–Carter model into the population projection. According to the median projection, the public pension fund will have a gap in about 35 years; and the cash flow will be negative about 25 years later. Furthermore, under the existing policy, the burden of insured employees will increase rapidly. Delayed retirement could relieve the coming solvency risk, but it does not fundamentally resolve the solvency problem in the long run. View Full-Text
Keywords: pension plan; solvency sustainability; actuarial balance; potential support ratio; stochastic simulation; probability forecast pension plan; solvency sustainability; actuarial balance; potential support ratio; stochastic simulation; probability forecast
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Zhao, Y.; Bai, M.; Feng, P.; Zhu, M. Stochastic Assessments of Urban Employees’ Pension Plan of China. Sustainability 2018, 10, 1028.

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