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Actuarial balance sheets as a tool to assess the sustainability of social security pension systems

Authors


  • This article is derived from a recent Actuarial Study published by the Office of the Chief Actuary (OSFI, 2012), and both authors were part of the working team for this Actuarial Study.
  • The authors would like to thank the OCA staff who assisted in the preparation of the original Actuarial Study as well as this article. The authors would also like to express their gratitude to Ole Settergren for answering questions regarding the Inkomstpension system and providing valuable feedback, and to Alice Wade for answering questions regarding the United States OASDI programme.

Addresses for correspondence: Assia Billig, Office of the Chief Actuary (OCA), Office of the Superintendent of Financial Institutions, 255 Albert Street, 12th Floor, Ottawa, Ontario K1A 0H2, Canada; Email: assia.billig@osfi-bsif.gc.ca. Jean-Claude Ménard, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions, 255 Albert Street, 12th Floor, Ottawa, Ontario K1A 0H2, Canada; Email: jean-claude.menard@osfi-bsif.gc.ca.

Abstract

The choice of the methodology used to produce a social security pension system's balance sheet is mainly determined by the system's financing approach. In this article, it is shown using the example of the Canada Pension Plan that if the assessment of the financial sustainability of a pay-as-you-go or partially funded system is done through the means of an actuarial balance sheet, then the methodology used should take into account future contributions of current and future participants. The balance sheets produced using the open group approach, as well as methodologies used in United States and Sweden, are discussed.

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