Estimation of Asset Accumulation of the Proposed Slovenian Mandatory-funded Pension Pillar

Kerlj, T. and Dolinar, G. and Mramor, D. (2001) Estimation of Asset Accumulation of the Proposed Slovenian Mandatory-funded Pension Pillar. Acta Oeconomica, 51 (4). pp. 513-539. ISSN 0001-6373

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Abstract

This paper analyses the impact of the introduction of a proposed mandatory earnings-related fully-funded pension scheme, named as the second pillar, on the accumulation of pension-funds assets and possibly on the capital market development in Slovenia. First, the dynamic simulation model is developed to estimate the accumulated pension-funds assets as a percentage of GDP in each future time period under the assumption of certainty. It is followed by the assumptions and estimates of the data used for independent variables and the results obtained by implementing the model for the period of 25 years. Relaxing the assumption of certainty, the paper proceeds with estimations of accuracy of the results with three methods. It is concluded, that the estimated level of accumulated pension-funds assets in GDP 25 years after the introduction of the reform will be approximately 40% and comparable to the level in countries with developed capital markets. Also, the accuracy of the estimate is surprisingly good. It is therefore expected that besides other effects, the introduction of this pension scheme would have an important impact on the development of the Slovenian capital market.

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