Risk reduction in two-pillar mandatory pension system under regulatory constraints: simulation-based evidence from Poland

Radosław Kurach , Paweł Kuśmierczyk , Daniel Papla


The 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.
Publication typeIn press
Author Radosław Kurach (E&F / DME)
Radosław Kurach,,
- Department of Mathematical Economics
, Paweł Kuśmierczyk (E&F / DME)
Paweł Kuśmierczyk,,
- Department of Mathematical Economics
, Daniel Papla (E&F / DI)
Daniel Papla,,
- Department of Insurance
Journal seriesApplied Economics Letters, ISSN 1350-4851, e-ISSN 1466-4291, (N/A 40 pkt)
Issue year2020
Publication size in sheets0.5
Keywords in EnglishPension system, pay-as-you-go, lifecycle portfolio, shortfall risk, funded pillar
ASJC Classification2002 Economics and Econometrics
Languageen angielski
Kurach_R_Kusmierczyk_P_Papala_D_Risk_reduction_in_two.pdf 997,83 KB
Not used for evaluationyes
Score (nominal)0
Score sourcejournalList
Publication indicators Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.53; WoS Impact Factor: 2017 = 0.504 (2) - 2017=0.568 (5)
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