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  • 1.
    John Mwakisisile, Andongwisye
    et al.
    Department of Mathematics, University of Dar es Salaam, Dar es Salaam, Tanzania.
    Larsson, Torbjörn
    Linköping University, Department of Mathematics, Optimization . Linköping University, Faculty of Science & Engineering.
    Singull, Martin
    Linköping University, Department of Mathematics, Mathematical Statistics . Linköping University, Faculty of Science & Engineering.
    Mushi, Allen
    Department of Mathematics, University of Dar es Salaam, Dar es Salaam, Tanzania.
    Projecting Tanzania Pension Fund System2017In: African Journal of Applied Statistics, ISSN 2316-0861, Vol. 4, no 1, p. 193-218Article in journal (Refereed)
    Abstract [en]

    A mandatory Tanzania pension fund with a final salary defined benefit is analyzed. This fund is a contributory pay-as-you-go defined benefit pension system which is much affected by the change in demography. Two kinds of pension benefit, a commuted (at retirement) and a monthly (old age) pension are considered. A decisive factor in the analysis is the increased life expectancy of members of the fund. The projection of the fund’s future members and retirees is done using expected mortality rates of working population and expected longevity. The future contributions, benefits, asset values and liabilities are analyzed. The projection shows that the fund will not be fully sustainable on a long term due to the increase in life expectancy of its members. The contributions will not cover the benefit payouts and the asset value will not fully cover liabilities. Evaluation of some possible reforms of the fund shows that they cannot guarantee a long-term sustainability. Higher returns on asset value will improve the funding ratio, but contributions are still insufficient to cover benefit payouts.

  • 2.
    Mwakisisile, Andongwisye John
    Linköping University, Department of Mathematics, Optimization . Linköping University, Faculty of Science & Engineering.
    Asset Liability Management for Tanzania Pension Funds2018Licentiate thesis, comprehensive summary (Other academic)
    Abstract [en]

    This thesis presents a long-term asset liability management for Tanzania pension funds. As an application, the largest pension fund in Tanzania is considered. This is a pay-as-you-go pension fund where the contributions are used to pay current benefits. The Pension plan analyzed is a final salary defined benefit. Two kinds of pension benefit are considered, a commuted (at retirement) and a monthly (old age) pension. A decision factor in the analysis is the increased life expectancy of the members of the pension fund.

    The presentation is divided into two parts. First is a long-term projection of the fund using a fixed and relatively low return on asset value. Basing on the number of members in 2015, a 50 years projection of members and retirees is done. The corresponding amount of contributions, asset values, benefit payouts, and liabilities are also projected. The evaluation of some possible reforms of the fund is done. Then, the growth of asset values using different asset returns is studied. The projection shows that the fund will not be fully sustainable in a long future due to the increase in life expectancy of its members. The contributions will not cover the benefit payouts and the asset value will not fully cover liabilities. Evaluation of some reforms of the fund shows that they cannot guarantee a long-term sustainability. Higher returns on asset value will improve the asset to liability ratio, but contributions are still insufficient to cover benefit payouts.

    Second is a management based on stochastic programming. This approach allocates investment in assets with the best return to raise the asset value closer to the level of liabilities. The model is based on work by Kouwenberg in 2001 includes some features from Tanzania pension system. In contrast with most asset liability management models for pension funds by stochastic programming, liabilities are modeled by number of years of life expectancy. Scenario trees are generated by using Monte Carlo simulation. Two models according to different investment guidelines are built. First is using the existing investment guidelines and second is using modified guidelines which are practical and suitable for modeling. Numerical results suggest that, in order to improve a long-term sustainability of the Tanzania pension fund system, it is necessary to make reforms concerning the contribution rate, investment guidelines and formulate target levels (funding ratios) to characterize the pension funds’ solvency situation. These reforms will improve the sustainability of the system.

    List of papers
    1. Projecting Tanzania Pension Fund System
    Open this publication in new window or tab >>Projecting Tanzania Pension Fund System
    2017 (English)In: African Journal of Applied Statistics, ISSN 2316-0861, Vol. 4, no 1, p. 193-218Article in journal (Refereed) Published
    Abstract [en]

    A mandatory Tanzania pension fund with a final salary defined benefit is analyzed. This fund is a contributory pay-as-you-go defined benefit pension system which is much affected by the change in demography. Two kinds of pension benefit, a commuted (at retirement) and a monthly (old age) pension are considered. A decisive factor in the analysis is the increased life expectancy of members of the fund. The projection of the fund’s future members and retirees is done using expected mortality rates of working population and expected longevity. The future contributions, benefits, asset values and liabilities are analyzed. The projection shows that the fund will not be fully sustainable on a long term due to the increase in life expectancy of its members. The contributions will not cover the benefit payouts and the asset value will not fully cover liabilities. Evaluation of some possible reforms of the fund shows that they cannot guarantee a long-term sustainability. Higher returns on asset value will improve the funding ratio, but contributions are still insufficient to cover benefit payouts.

    Place, publisher, year, edition, pages
    Afrika Statistika - SPAS, 2017
    Keywords
    Pension fund; Pay-as-you-go; Defined benefit; Demography
    National Category
    Probability Theory and Statistics
    Identifiers
    urn:nbn:se:liu:diva-143272 (URN)10.16929/ajas/2017.193.210 (DOI)
    Note

    A mandatory Tanzania pension fund with a final salary defined benefit is an- alyzed. This fund is a contributory pay-as-you-go defined benefit pension system which is much affected by the change in demography. Two kinds of pension benefit, a commuted (at retirement) and a monthly (old age) pension are considered. A decisive factor in the anal- ysis is the increased life expectancy of members of the fund. The projection of the fund’s future members and retirees is done using expected mortality rates of working population and expected longevity. The future contributions, benefits, asset values and liabilities are analyzed. The projection shows that the fund will not be fully sustainable on a long term due to the increase in life expectancy of its members. The contributions will not cover the benefit payouts and the asset value will not fully cover liabilities. Evaluation of some possi- ble reforms of the fund shows that they cannot guarantee a long-term sustainability. Higher returns on asset value will improve the funding ratio, but contributions are still insufficient to cover benefit payouts. 

    Available from: 2017-11-28 Created: 2017-11-28 Last updated: 2018-08-31Bibliographically approved
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