A MICROSIMULATION MODEL FOR SLOVENIAN PENSION SYSTEM

1. A MICROSIMULATION MODEL FOR SLOVENIAN PENSION SYSTEM Mitja ČOK Boris MAJCEN Jože SAMBT Tomaž TURK 2nd Microsimulation research workshop October 2012, Bucharest, Romania

2. CONTENT • AIMS OF THE PROJECT • ESTABLISHMENT OF A SYSTEM OF LINKED TADABASES • MODULES • PIT and SSC module • Socio-demographic module • Sub-modul forweights • Economic module • Model of generational accounts • Pension module • “DYNAMIC” PENSION MODEL • USER FRIENDLY INTERFACE • CONCLUSION

3. AIMS OF THE PROJECT • Upgradingoftheexisting MSM (PIT and SSC) and model ofGenerationalaccounts • Developmentof a socio-demographic, exconomicandpensionmodules • Adding “time dynamics” throughweights • Establishmentof a systemoflinkedtadabases • Possible platform forothermodules (social transfers, education, health)

4. ESTABLISHMENT OF A SYSTEM OF CONNECTED TADABASES • Sample of 40,000 households with 112,000 individuals • It is part on Statistical Office annual work plan • New base year - 2010 • To be renewed every three years • Remote data access to databases for research purposes

5. MODULES PIT and SSC module • Calculation of PIT/SSC • Possibilities to change any tax parameter, e.g: • Additional PIT brackets • SSC ceiling.. • User friendly interface

6. MODULES Socio-demographic module • It is based on Eurostat demographic projections EUROPOP2010 • Possibilities to change any demographic parameter: • Fertility • Mortality • Migrations • Possibilities to change transion functions for demographic parameters • User friendly interface

7. MODULES Sub-module for weights • Enables a “construction” of the entire population • It is run after changes in demographic parameters are set • Time consuming process: one hour for two dimensions • We use two dimensions: age (one year age profiles) and gender • Static-dynamic model (future projections are based on weights changes) • User friendly interface

8. MODULES Sub-module forweights Weightsforselected age, sampleof 112,000 individuals, calibrated to EUROPOP2010

9. MODULES Economic module • It connects the results of other modules: • Population <= socio-demographic module • Number of pensioners/insured <= pension module • Productivity and unemployment rates are exogenous variables (in baseline scenario from the EU Commision assumptions), set by user

10. MODULES Economic module • It calculates aggregates: • GDP • Different categories of government revenues/expenditures (taxes by type etc.) • Public deficit/surplus • Public debt • Pensions • It calculates EU indexes of long-term sustainability S1 and S1 • User friendly interface

11. MODULES Economic module – Generational accounts • It calculates generational accounts for each generation- i.e. net financial position of representative individual regarding the public-finance system in the rest of his/her life • If reveals the impact of each scenario on each generation • User friendly interface

12. MODULES Pension module • Reproduces the pension system from base year -2010 • It is based on old-age pensioners who retired in period 2000-2010 • Includes all pension system parameters (pay-as-you-go): • Working period/age conditions • Other conditions (e.g. number of children; compulsory military service) • Calculation of pension base • Pension formula • Indexation of pensions • Health insurance for pensioners

13. MODULES Pension module • NDC scheme • Basic concept is included (formula for NPV of contributions and rents)

14. MODULES Pension module – how does it work? • Module defines individuals who fulfill retirement conditions • Calculates their pensions • Calculates aggregates (pensions, number of pensioners, active contributors) • Transition periods are taken into account – they can be set by user • User friendly interface

15. “DYNAMIC” PENSION MODEL • CONSISTS OF FOUR MODULES: • PIT and SSC module • Socio-demographic module • Sub-module for weights (GREGWT) • Economic module • Model of generational accounts • Pension module • WRITTEN IN MATRIXES • IN REAL TERMS (NO INFLATION) • WITH USER FRIENDLY INTERFACE

16. Demographic assumptions SOCIO-DEMOGRAPHIC Population_F Population_M Fundamental base GREGWT WEIGHTS Fundamental base Matrix of retirenment conditions Who is retired (status) PENSION PIT / SSC External (user) parameters Sum of pensions Rate of employment Sum of PIT / SSC Rate of retirenment ECONOMIC / GENERATIONAL ACCOUTS External (user) parameters “DYNAMIC” PENSION MODEL Fundamental base

17. USER FRIENDLY INTERFACE • Enables scenario settings • It is used as data-warehouse – contains policy definitions • It connects all four modules • Displays the results

18. USER FRIENDLY INTERFACE

20. AVERAGE PENSION

21. NUMBER OF PENSIONERS/EMPLOYEES

22. PENSION EXPENDITURES AS SHARE OF GDP

23. CONCLUSIONS • A SYSTEM OF LINKED TADABASES IS ESTABLISHED • ALL FOUR MODULES ARE CONSTRUCTED • THE MODEL WORKS • CHALLENGES? • Remotedataaccess to the model (Statistical Office server) • Long-term maintenaceofthe model • Possible platform forothermodules (social transfers, education, health)