Asset Allocation Of Individual Pension In China

Elderly care and pension asset allocationare the key problems in the process of social and economic development.China had been in ageing society since 2000 according to international standard,and with two significant characteristics of ageing acceleration and "aged before becoming rich".Nowadays,there are several outstanding characteristics in China economy including economic growth slow down from high speed,adjustment and upgrading of economic structure,and innovation-oriented growth from factor-driven growth.Moreover population and demographic structure have been in the notable change.Therefore public pension system has to face the challenge to provide more and more pension for the elderly.As the result,individual pension should be developed through reasonable asset allocation of individual pension.Pension asset is generally divided into four categories:mandatory asset,financial asset,material asset,and human resource.Mandatory asset and financial asset are dominant in macro-and micro-economic level because material asset and human resource are very difficult to liquidize.Meanwhile there are three shortcomings in pension asset allocation:1)low security level,2)low replacement rate,and 3)low investment return.So it is natural to courage people to buy more individual pension for their elderly care.In this paper,three problems of individual pension asset allocation were discussed:Determinants of individual pension.Overlapping Generations(OLG)model was designed as economic framework to study individual pension and its determinants.In a closed economy,the life cycle of a typical individual were divided into two phrases:working time and retirement time,and the individual made decision to maximize the utility of the whole lifecycle.Two models were built up,one is basic model,and another is the extended one which takes the"New Normal" into account.It is concluded several determinants will affect capital per capita and individual pension such as public pension premium rate,heritage per capita,human resource,interest margin,and population increase ratio.Scenario simulation was implemented,and there are four policy implications:1)retirement delay,2)birth rate improvement,3)public pension premium rate adjustment,and 4)investment efficiency.Measurable scale of individual pension.Life tables of 2010-2030 were predicted based on Lee-Carter model which was estimated with mortality per age.So actuarial system of social and individual pension was built up,and measurable scale of individual pension was determined after system parameters were assumed.It showed working people should hold 27-35 times of current annual wages to afford his/her own elderly care except public pension.Reasonable allocation of individual pension asset.A discrete model was constructed to research asset allocation of individual pension based on BMS-BDR model,a typical lifecycle finance model.Firstly parameters were assumed according to the reality of Chinese economy.Secondly optimum solution among work-leisure,consumption-saving,and return-risk will calculated.Finally there have been got some experienced rules,which were better than "CS rules" and "80 rules" generally adopted in household financial consulting practice.According to the study of individual pension asset,the main conclusion of this paper includes:firstly,aging and the prolonging of life expectancy are the fundamental factors which influence the individual pension asset.The government should formulate reasonable population policy and policy of later retirement to alleviate endowment pressure which is caused by aging.Secondly,Endowment Insurance System has crowding out effect on individual pension asset to some degree.The government should keep on implementing the innovation of Endowment Insurance System to expand the sources of individual pension asset under the stable market of endowment insurance system.Thirdly,individual pension asset has a close relationship with financial market.The government needs to develop the financial market with compliance and in order;encourages the innovation of financial product;improves the mobility of the pension in material class.Fourthly,we are short of individual pension.The government can increase the supply of individual pension and decrease the need of pension to cover such a chunk of that.Fifthly,the key of reasonable individual pension asset is getting stable returns in long-term.There are three innovation points as following:firstly,it analysis the foundation model of factors affecting individual pension asset through OLG,combining with the features of our country's economic development nowadays,building the derivation model with delaying retirement,technical dynamic,transformation efficiency of financial market,to make the conclusion more closer to the actual situation of the economic development.Secondly,through Lee-Carter model and Actuarial model,when the scale of the individual pension reaches 27-35 times as the social average wage level that year can it satisfy the need of endowment sufficiently.Thirdly,building a discrete model based on BMS-BDR life cycle model,the study quantitatively calculates out the structure of individual pension asset of a person in different ages.Individuals need to have the concept of self-endowment and make long-term plan with short-term adjustments,combining personal age with wealth condition to take risk investment,raise income as much as possible under the government's support and the innovation of financial products.These configuration schemes have certain worth of practice.