Optimal Design of Raising Retirement Age

DOI10.1080/10920277.2024.2311666MaRDI QIDQ7000896zbMATH OpenFDO

Authors Jinggong Zhang, Xiaobai Zhu

Publication date 7 April 2025

Published in North American Actuarial Journal (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1080/10920277.2024.2311666

Mathematics Subject Classification ID

Actuarial mathematics (91G05)

Review text

The decline in the fertility rate and the increase in life expectancy worldwide lead to population aging which threatens the future fiscal balance of the public pension system across many countries. Policymakers have often undertaken parametric pension reform as a solution, in particular, raising the full retirement age (FRA). \N\NThe authors study the optimal schedule for lifting the FRA using the optimal control approach. Given the aggregate actuarial loss of the pension system, the target is to smoothly distribute the deficit across different generations, subject to a fairness constraint that prohibits any cohorts from taking advantage of others. \newline The results are illustrated using China as an empirical example. The impacts of different actuarial assumptions, benefit accrual formulae, and population structures are investigated.

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