| dc.description.abstract | In Brazil, the development of public pension programs resulted in different regimes for civil servants, the Regimes Próprios de Previdência Social (RPPS), and workers in the private sector. RPPS are generally small: 60% with less than 500 active workers. Such small number of participants, implicates greater variability in the demographic events (mortality and transitions) and it is more common to observe results more distant from the expected. However, even in this given scenario, such variability is not considered properly in the decision making process and the calculation of the plan costs and its sustainability.The objective of this paper is to analyze how the variability of demographic events affects the solvency of small public pension programs for civil servants. More specically, we investigate the relationship between the variability of demographic events and population size and how they impact on the calculation of decit risks. We also propose a way to measure the demographic risk and how to include that in the operationalization of the programs.In this paper, we simulate the impacts of the variability of demographic events in small pension programs from a hypothetical situation of implementing a new RPPS program in actuarial balance. The impacts of random variation of demographic events is analyzed using Monte Carlo method. We started out with a hypothetical population of civil servants; in each round the individuals are exposed to different risks based on the demographic events. We store the information on the status of each individual (active, beneciary and dead) and their dependents. We also produce estimates of amount of contribution to the program, amount of benets paid and mathematical reserve. We run the simulations for 75 years. We replicate the simulation 1000 times for different sizes of the initial population of civil servants (100, 250, 500, and 1000). By the distribution of the values of the mathematical reserve is possible to know, for CVaR, the size of the demographic decit risk assumed according to the size of the population involved in the plan. The distribution of the time until failure allow inferences about when it runs the risk of ruin. The results show that the risk of insolvency increases with time by cumulative effect of the variability of demographic factors even if the actuarial assumptions adopted are appropriate to the public pension program. This effect, however, can be intensied by the program protability, that is, plans with higher rates of returns on investments are the most vulnerable to demographic risks. In addition, we found a relationship between the decrease in mortality and a decreased risk of solvency when this drop is incorporated into the calculation of the contribution rate. Likewise, higher levels of disability imply increased variability of demographic functions and increased risk of solvency when analyzed standard deviation, CVaR, the time until the deficit and the rate of population risk. When the model ignores future demographic change in function, increasing the retirement age increases the capacity payment plans. Despite these results, the risk of financial deficit from demographic variability are only observed after 30 years of the plan. However, actuarial deficits are present since the early years after the implementation of RPPS. | |
