Instead, the assumed interest rate is an earnings "target" the insurer sets for the annuity. To maintain payment levels, the account must meet or exceed this earnings target. Bear in mind that the AIR is not a guaranteed rate of return - hence the "assumed" part.
The higher the assumed interest rate, the higher the payout for the policyholder.īecause insurance companies still have profit margins that need to be met and costs to be covered, the AIR is the minimum interest rate that must be earned on investments in the policyholder's account. Ultimately, this affects the payouts you get from the insurer. The AIR is used to determine the value of an annuity contract by insurance companies. To begin, a variable annuity’s interest rate is also called the assumed interest rate (AIR). The online version of this article (10.1007/s1068-3) contains supplementary material, which is available to authorized users.What Is the Assumed Interest Rate of a Variable Annuity Contract? The gain in female workers is particularly significant, reaping the benefits of the education expansion since the 1990s. Furthermore, the retained workers are increasingly better educated. We show substantial impact with added work force ranging from 28 to 92 million per year depending on which scenarios are implemented. Our projections reveal the impact of nine scenarios on the Chinese labor force in the next few decades, highlighting the changes in “the high human capital workforce”-those with good health and education. Two critical aspects of human capital-health and education-are incorporated to account for the quality of the work force. We examine the impact of postponing the retirement age on the human capital of China in the next four decades.
These findings show how the recent reform is ironically reinforcing the existing social cleavages between different types of Chinese workers.Īs China continues to age rapidly, whether the country should adjust the official retirement age, and if so, when and how, are currently major policy concerns. Having “local” citizenship does not offset the negative impact of labor informality on workers’ enrollment in the employment‐based pension program. Second, local citizenship filters the negative impact of labor informality, but only for the residency‐based pension program. First, the impact of labor informality differs across the two pension programs. This article makes the following two points. This article fills this gap by analyzing two waves of a national‐level survey-the China Labor Dynamic Survey of 20. Despite this historic pension reform, the question of how labor informality influences one's pension participation under the reformed pension regime has been insufficiently discussed. The Chinese pension reform of 2011 allowed informal workers to enroll either in the employment‐based pension program or in the residency‐based pension program. Our study suggests the needs to increase the fiscal subsides used in China’s rural pension system, and can provide useful implications in designing the effective pension system for rural residents. Overall, our results imply that the incentive pension is an effective mechanism in encouraging rural residents to participate in pension programs, but the current level of matching subsidies is not sufficient to improve participation or increase contributions. However, none of these fiscal subsidies have significant effects on the amount of individual contributions. Our study shows that the rural residents’ participation rates can be improved significantly by increasing basic pensions or by providing incentive pensions, but not by providing matching subsidies. We then examine how fiscal subsidies, in the forms of basic pensions, incentive pensions, and matching subsidies, affect participation rates and individual contributions. We first provide an overview of China’s rural pension system, and explain the formulas used to calculate the pension payments. This paper studies the impact of fiscal subsidies on the sustainability of China’s rural pension system.