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Between DB and DC: optimal hybrid PAYG pension schemes | SpringerLink
Source: link.springer.com
Article summary:
1. This article discusses alternative architectures for pension schemes that are a mix between defined benefit (DB) and defined contribution (DC) plans in order to achieve both financial sustainability and social adequacy.
2. The paper introduces the Musgrave rule, which defines a relationship between contributions and benefits that has to be satisfied at each instant, in such a way that these two quantities move together.
3. It also presents different families of hybrid pension schemes between DB and DC, and studies their behaviour under demographic uncertainty in order to search for optimality from a risk-sharing point of view.
Article analysis:
The article is written by experts in the field of actuarial science, making it reliable in terms of its content. The authors provide evidence for their claims by citing relevant sources from the scientific literature, which adds to the trustworthiness of the article. Furthermore, they present different approaches to pension design and discuss their implications on risk sharing between generations, providing an unbiased overview of the topic.
However, there are some points that could be improved upon. For example, while the authors discuss different approaches to pension design, they do not explore counterarguments or potential risks associated with them. Additionally, they do not present both sides equally when discussing the implications of demographic shocks on pension systems; instead they focus mainly on how these shocks affect retirees rather than active workers as well. Finally, there is no mention of promotional content or partiality in the article; however it would be beneficial if this was addressed more explicitly so as to ensure impartiality throughout the text.