ABSTRACT
The regulatory framework of the Polish pension system is far-removed from the optimal lifecycle portfolio approach, which recommends a time-varying asset mix to minimize portfolio risk. Nevertheless, a question emerges on how large diversification gains can grow under the existing rules. This study accounts for the current restrictions and estimates risk-reduction opportunities under the two-pillar pension system. We compare the outcomes with our previous results for optimal portfolio allocation and, as in the previous study, use a Monte Carlo approach with a copula function to simulate the distribution of replacement rates for the Polish pension system. We conclude that the regulations hinder, to a significant extent, the opportunity to minimize shortfall risks, an unsatisfactory outcome for Polish pensioners.
Disclosure statement
The authors report no potential conflict of interest.
Data availability statement
The data that support the findings of this study are openly available in Harvard Dataverse at https://doi.org/10.7910/DVN/AB5XYQ, UNF:6:KwP0Ac2vazeqj6jkfpiM6w== [fileUNF].
Notes
1 Note that this is the true value of pension contribution.