Biography: Prof. Hardy's research focuses on risk management strategies for long term contingent risks. The work is problem-driven, using theory and methodology from financial engineering, statistics and actuarial science. Much of her current research seeks to measure and promote fairness, efficiency and transparency in the design and implementation of insurance and pension risk solutions.
Title: Target benefit pension design
Abstract: In this talk, we will explore a form of target benefit plan that allows for structured, transparent intergenerational risk sharing. The plan design draws significantly from earlier analysis of much more stylized TB plans, as seen in, for example, Cui et al (2011), Wang et al (2018) and Zhu et al (2021). We compare the target benefit (TB) plan design with the traditional defined benefit (DB) design, based on five broad areas of comparison: affordability (average cost), sustainability (volatility of costs), efficiency, adequacy, and fairness. We assume that, implicitly, contributions to the plan come from workers' salaries, so the problem is to balance the interests of workers and retirees. We find that if we take into consideration the possibility of default, the TB design can offer a better balance of costs and benefits than the traditional DB plan, with respect to affordability, efficiency, sustainability, adequacy, and intergenerational fairness.
This is joint work with David Saunders (University of Waterloo) and Xiaobai (Mike) Zhu (SWUFE).