Documents Ménard, Jean-Claude 4 results

"The choice of the methodology used to produce a social security pension system's balance sheet is mainly determined by the system's financing approach. In this article, it is shown using the example of the Canada Pension Plan that if the assessment of the financial sustainability of a pay-as-you-go or partially funded system is done through the means of an actuarial balance sheet, then the methodology used should take into account future contributions of current and future participants. The balance sheets produced using the open group approach, as well as methodologies used in United States and Sweden, are discussed."

"Canada, Denmark, the Netherlands and Sweden have advanced multi-pillar pension systems. Using micro-simulations, this article presents a close examination of the interaction of pillars in these countries. The relative importance and the role of the different pension pillars vary from country to country, and according to age, income, gender and socio-economic dimensions as well as between generations. A further area of investigation is the mitigation capacity of the four pension systems. On the one hand, adverse labour careers lead to lower life-time earnings and lower private pension accruals. On the other hand, these effects are mitigated through the design of pillars and their interaction. Mitigation is important to income security and stability in retirement and to post-retirement income distribution. However, mitigation mechanisms come at the cost of incentives. Moreover, in many countries, the generosity of public benefits is set to decrease – increasing the importance of private pensions. This will shift risk and uncertainty from employers and pension institutions to individuals. Thus, risks and uncertainties related to private pensions will become more important, raising questions about the division of responsibilities between public and private pensions, and about the potential of mitigating such risk through pillar interaction. These concerns are further reinforced by labour market changes. Although a pension system free of distortions is inconceivable, this article seeks to contribute to addressing how mitigation should be designed, and how mitigation and risk sharing should be balanced against incentives, challenges which are as much political as technical."

"In a context of increasing transparency of social security scheme design and financing, assessing the financial implications of the promises made to current and future retirees of a social security pension system has become a key issue. The central role played by actuaries in the financial evaluation of social security systems means that the debate regarding methods and assumptions to use in such an exercise is of interest to all actuaries, those who use their work and those whose decisions are based on their work. This, in theory, appears a rather technical debate. However, in reality, these deliberations have a much wider impact. The discussion around how to assess the implications of promises made by social security systems to current and future populations will affect the decisions taken regarding the key features of systems, in particular the social contract between generations. It also feeds into the debate regarding sustainability, inter‐ and intra‐generational equity, the adequacy of benefits and the robustness of systems; that is, how future changes to the economic and demographic environment will affect systems. This introductory article discusses the importance of this topic including the implications for actuaries, policy‐makers and other stakeholders and then summarizes the six substantive articles that comprise this special issue. These articles reflect different points of view, but also different experiences and environments – which adds to their value as contributions to this important debate. Finally, this introduction sets the context for the reader – to ensure that the technical aspects of the set of papers are considered within the wider framework of social security provision and financing."

"The processes used to assess the financial sustainability of the Canada Pension Plan (CPP) and the corresponding reporting are recognized internationally as “best practices”. In the context of the international and multi‐disciplinary debate about the most appropriate methodology for the measuring and reporting of social security assets and obligations, the experience and practices of Canada offer a number of important policy lessons. The article analyses the assets and obligations of the CPP using different actuarial balance sheet methodologies, i.e. open and closed group. It concludes that the balance sheets under the closed‐group with and without future benefit accruals methodologies do not reflect the nature of the partial funding approach of the CPP, whereby future contributions represent a major source of financing for future expenditures. As such, it is inappropriate to reach a conclusion regarding the Plan's financial sustainability considering only the asset shortfalls determined under the closed group with and without future accruals balance sheets. The article asserts that measuring the Plan's assets and obligations using the open‐group approach provides information that properly reflects how changing demographic and economic environments affect the long‐term sustainability of the CPP. In contrast, using the closed group without future accruals approach may provide incomplete or even misleading information. Finally, the article discusses approaches used to report the financial state of the CPP, including both actuarial and financial reporting. It highlights the comprehensive disclosures approach adopted for the purpose of CPP annual reports and the Public Accounts of Canada."