Probabilistic Approach to Government Employee Pension System

공무원연금제도에 대한 확률적 고찰

Kim, Joo-Yoo;Song, Seong-Joo

  • Published : 2009.07.31


This article examines the financial soundness of the government employee pension system(GEPS). We use a model that simplifies the existing GEPS considering survival probability distribution of the life of employees. Two approaches were selected for the research: One is the expected net value of pension for an individual employee and the other is the default probability of the system from Monte-carlo simulation. The outcome reveals following three possibilities. First of all, the individual expected net value presents unfairness between the retiree's premium and the benefit he/she receives. Secondly, the Monte-carlo simulation suggests that the default is highly likely to happen in less than 30 years. Thirdly, the governmental reserve and subsidy for GEPS should be required to a certain degree in order to alleviate the probability of default less than 5 percent for the next 30 years.


Government employee pension system;expected net value;Monte carlo simulation;default probability


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