(A) study on the effect of Korea pension management on social system under asset-liability management framework

Abstract

Currently, Korea’s National Pension Plan (NPS) is the third-largest public pension in the world. The accumulated fund of the NPS has increased gradually, and has now reached 35% of the national gross domestic product. However, this large fund will become depleted by 2060 due to the aging population and the low fertility rate. In this dissertation, we study asset-liability management (ALM) model of the NPS. We first focus on the constructing the model that find the optimal portfolio and the optimal contribution rate. We present a model that combines a stochastic optimal control approach and a stochastic programming approach. Then, we add the social investment to pension portfolio of pension plan. We calculate the effect of an investment in raising the fertility rate. In addition, we examine whether an investment in population growth improves the sustainability of the NPS. Next, we extend the model into an ALM model which is more advanced approach by applying multi-stage stochastic programming. Extending the scope of ALM to social investment is a new approach that has not been attempted in other ALM studies. Finally, we construct a model providing the optimal savings management for individuals under pension plan scheme change.