Dynamics Simulation Approach in Analyzing Pension Expenditure
Salary risk and demographic risk have been identified
as main risks in analyzing pension expenditure particularly in
Defined Benefit pension plan. Therefore, public pension plan in
Malaysia is studied to analyze pension expenditure due to salary and
demographic risk. Through the literature review and interview session
with several officers in public sector, factors affecting pension
expenditure are determined. Then, the inter-relationships between
these factors are analyzed through causal loop diagram. The System
Dynamics model is later developed using iThink software to show how
demographic and salary changes affect the pension expenditure. Then, by
using actual data, the impact of different policy scenarios on pension
expenditure is analyzed. It is shown that dynamics simulation model of
pension expenditure is useful to evaluate the impact of changes and
policy decisions on risk particularly involving demographic and salary risk.
[1] Disney, R. and Johnson, P., Pension systems & retirement incomes
across OECD countries, Edward Elgar, 2001, pp. 1-3.
[2] Chang, K.W., "A risk management perspective on public pension
reform," PhD diss., Boston University, 2000.
[3] Maani, K.E & Cavana, R.Y. Systems Thinking and Modeling,
Understanding Change and Complexity, Pearson Education N.Z press,
2000, pp. 16-70.
[4] Chang, S.C., "Optimal pension funding through dynamic simulation: the
case of Taiwan public employees retirement system," Insurance,
Mathematics & Economics, vol. 24, pp. 187-199,1999.
[5] Chang, S.C and Cheng, Y.H., "Pension valuation under uncertainties:
implementation of a stochastic & dynamic monitoring system," The
Journal of Risk & Insurance,vol. 69, pp. 171- 192, 2002.
[6] Chaim, R. M., "Combining ALM and System Dynamics in Pension
Funds," in online Proc. of the 24th International Refereed Conference of
System Dynamics Society, Netherlands, 2006.
[7] Chaim, R. M., "Dynamic stochasticity in the control of liquidity in asset
and liability management (ALM) for pension funds," in online Proc. of
the 25th International Refereed Conference of System Dynamics Society,
Boston,2007.
[8] Jimeno, J.F., Rojas, J.A. and Puente, S., "Modelling the impact of aging
on social security expenditures," Economic Modelling, vol. 25, 2008, pp.
201-224.
[9] Shimada, T, Kameyama, S, Uchino, A, Machida, K and Watanabe, M,
"Simulation model of Japanese welfare annuity system," in online Proc.
of the 8th International Refereed Conference of System Dynamics
Society, Chestnut Hill, USA, 1990.
[10] Chaim, R. and Streit, R.E. "Pension funds governance: combining SD,
Agent based modeling and fuzzy logic to address Dynamic Asset and
Liability Management (ALM) problem," in online Proc. of the 26th
International Refereed Conference of System Dynamics, Society,
Athens, 2008.
[1] Disney, R. and Johnson, P., Pension systems & retirement incomes
across OECD countries, Edward Elgar, 2001, pp. 1-3.
[2] Chang, K.W., "A risk management perspective on public pension
reform," PhD diss., Boston University, 2000.
[3] Maani, K.E & Cavana, R.Y. Systems Thinking and Modeling,
Understanding Change and Complexity, Pearson Education N.Z press,
2000, pp. 16-70.
[4] Chang, S.C., "Optimal pension funding through dynamic simulation: the
case of Taiwan public employees retirement system," Insurance,
Mathematics & Economics, vol. 24, pp. 187-199,1999.
[5] Chang, S.C and Cheng, Y.H., "Pension valuation under uncertainties:
implementation of a stochastic & dynamic monitoring system," The
Journal of Risk & Insurance,vol. 69, pp. 171- 192, 2002.
[6] Chaim, R. M., "Combining ALM and System Dynamics in Pension
Funds," in online Proc. of the 24th International Refereed Conference of
System Dynamics Society, Netherlands, 2006.
[7] Chaim, R. M., "Dynamic stochasticity in the control of liquidity in asset
and liability management (ALM) for pension funds," in online Proc. of
the 25th International Refereed Conference of System Dynamics Society,
Boston,2007.
[8] Jimeno, J.F., Rojas, J.A. and Puente, S., "Modelling the impact of aging
on social security expenditures," Economic Modelling, vol. 25, 2008, pp.
201-224.
[9] Shimada, T, Kameyama, S, Uchino, A, Machida, K and Watanabe, M,
"Simulation model of Japanese welfare annuity system," in online Proc.
of the 8th International Refereed Conference of System Dynamics
Society, Chestnut Hill, USA, 1990.
[10] Chaim, R. and Streit, R.E. "Pension funds governance: combining SD,
Agent based modeling and fuzzy logic to address Dynamic Asset and
Liability Management (ALM) problem," in online Proc. of the 26th
International Refereed Conference of System Dynamics, Society,
Athens, 2008.
@article{"International Journal of Business, Human and Social Sciences:54514", author = "Hasimah Sapiri and Anton Abdulbasah Kamil and Razman Mat Tahar and Hanafi Tumin", title = "Dynamics Simulation Approach in Analyzing Pension Expenditure", abstract = "Salary risk and demographic risk have been identified
as main risks in analyzing pension expenditure particularly in
Defined Benefit pension plan. Therefore, public pension plan in
Malaysia is studied to analyze pension expenditure due to salary and
demographic risk. Through the literature review and interview session
with several officers in public sector, factors affecting pension
expenditure are determined. Then, the inter-relationships between
these factors are analyzed through causal loop diagram. The System
Dynamics model is later developed using iThink software to show how
demographic and salary changes affect the pension expenditure. Then, by
using actual data, the impact of different policy scenarios on pension
expenditure is analyzed. It is shown that dynamics simulation model of
pension expenditure is useful to evaluate the impact of changes and
policy decisions on risk particularly involving demographic and salary risk.", keywords = "Demographic and Salary risk, Pension Expenditure,Public Policy, System Dynamics.", volume = "4", number = "10", pages = "2036-7", }