Social Endowment Insurance Fund Risk Research In China

Pensions are the most important parts of the modern old-age insurance theme ofthe society security system. As the reform of the social security institution from Pay-as-you-go to the full-fund theme, pensions came to the stage of the world. Throughthe process of reforming and adjusting of Chinese old-age insurance, the three-pillarmode was established with three parts: Basic pension insurance, annuities andpersonal savings for old-age insurance. There are two parts in the basic pensionsinsurance: personal account and social pooling. This mixed-theme as an institutionalinnovation solved the problem arises with Chinese social security reformingtemporally. And the problem comes with the institution change still need to beresolved. On the one side, a portfolio with higher return of investment of pension isadmirable as the old-age-time comes which bring more and more pressure on payingfor pensions; another side, the old-age security system still on its way of establishingand completing. The endogenous risk of the system which originates from thetransform of the institution is the key to the final solution.As the pensions is issued by the old-age security system, a review on the pensionand the systems and the relationship between them also being examined. And then theNational Council for Social Security Fund is focused and its investment andmanagement of the funds is also taken into consideration.Taking the view from the Full-fund pension, we reviewed the relationshipbetween old-age insurance and pensions. The risks of pensions have been examinedin the light of analysis from the New-institution economics by comparing the pensionas a fund and the natural of the firm. Considering the risk management, two sorts ofthe risks from pensions have been analyzed: the outside risks which mean to thefinancial risk and the inside risk which are the institutional risk such the emptyaccount of the personal account in China. Based on these, we take the tool of VaR,value at risk, from the modern financial risk management, using it to analyze theoutside risk of the pensions. Data were collected from the software of Stock quotesDaZhiHui, we use three index as three portfolio and using three method to calculateits VaR, the Historical Simulation, the GARCH mode of the volatility, and MonteCarlo Simulation. Differently, the inside risks are more difficult to estimate. Both the operations of bureaucracy risks and the empty account were analyzed, and especially,the ratio of the empty account of the fund was tested by empirical data from Kunming,Yunnan province.Finally, advice on risk management and control were given each to the inside oroutside situation, and all the suggestions can be conclude into building an effectiveand right social pension system which we mentioned at the very beginning.