Risk reduction in two-pillar mandatory pension system under regulatory constraints: simulation-based evidence from Poland
Radosław Kurach , Paweł Kuśmierczyk , Daniel Papla
AbstractThe regulatory framework of the Polish pension system is far-removed from the optimal lifecycle portfolio approach, which recommends a time-varying asset mix to minimize portfolio risk. Nevertheless, a question emerges on how large diversification gains can grow under the existing rules. This study accounts for the current restrictions and estimates risk-reduction opportunities under the two-pillar pension system. We compare the outcomes with our previous results for optimal portfolio allocation and, as in the previous study, use a Monte Carlo approach with a copula function to simulate the distribution of replacement rates for the Polish pension system. We conclude that the regulations hinder, to a significant extent, the opportunity to minimize shortfall risks, an unsatisfactory outcome for Polish pensioners.
|Journal series||Applied Economics Letters, ISSN 1350-4851, e-ISSN 1466-4291, (N/A 40 pkt)|
|Publication size in sheets||0.5|
|Keywords in English||Pension system, pay-as-you-go, lifecycle portfolio, shortfall risk, funded pillar|
|Not used for evaluation||yes|
|Publication indicators||: 2018 = 0.53; : 2017 = 0.504 (2) - 2017=0.568 (5)|
* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.