The Comparison And Enlightenment In Terms Of International Experience In Investment Choice By Pension Plan Participants

With the tendency of aging society, many countries introduced an individual account in the Old Age Security Program. The individual account generally adopts DC model, it clearly records payment, investment income, management costs, and investment losses. But on the other hand, individuals have to take the risks and consequences of their investment decisions. With the rapid development of pension plans which include an individual account, a basic policy concern in these systems is how many options individuals should have over key decisions such as the providers and investment portfolios.These financial decisions will affect the quality of living after retirement. Now, our country implements a social pooling and individual account combination model. Every member owns his account. Besides, every employee who takes part in the occupational pension plan also owns an individual account. With the development of our country’s endowment insurance system, how much investment option rights workers should have will be a hot topic. Different countries adopt different ways in performing individual option rights.This paper consists of five parts. The main content and the view of each part are as follows:Part one:Discuss the research purpose and significance of this paper and briefly summarized those related literatures on domestic and overseas views.Part two:Research on individual investment choice and its operational mechanism. Firstly, the paper introduces the management model of the pension funds and their different investment requirements. Secondly, theoretical explanation on investment choice is stated from three aspects:private property rights, centralized decision-making model’s unsustainability and the hypothesis of rational man. Thirdly, it is because that the key aspects of pension plan design are the range of investment options,the design of the default strategy options, the extent of freedom of choice and the minimum revenue guaranteed. This part also gives a review of the international experience from the four aspects.Part three:The comparison and the enlightenment in terms of international experience in investment choice by pension plan participants. The paper selects four typical countries:Chile,Singapore,Sweden,and America.Firstly,the paper analyzes their management system on individual account.Based on this, the paper analyzes the concrete practicable methods and implementation effects in these countries.Secondly,the paper summarizes the merits of offering investment choice to plan members.Thirdly,the paper gives adequate consideration to factors and constraints which influence individual investment choice.Part four:Analysis on individual investment choice from the behavioral finance perspective. Firstly, the paper introduces the background of behavioral finance and outlines on their study in the investment field. Secondly,Behavioral economists,on the other side,have shown that in reality several obstacles and behavioral challenges compromise good investment decision making.Many individuals are not particularly good at the retirement savings problem.It gives the explanation and the interpretation. Finally, the paper draws a conclusion that it is improper to adopt investment choice blindly.Part five:Applicability analysis and development prospects on individual investment choice.This section summarizes the present situation and problems of the personal account of China’s basic aged pension and enterprise annuity plan. Secondly,on the basis of international experience and the analysis of behavior finance,combined with China’s particularity in the old-age security system,the paper points out that it is improper for China to adopt investment choice blindly.But in the long run, it is an inevitable trend to offer investment choice to individuals.Therefore,it is necessary for China to gradually improve the funding vehicle and create conditions for introducing the new systemThe unique features and innovations of this paper include:1) The topic is perspective. The introduction of the individual investment choice is an innovation of the reform of the pension system in recent years, with China’s personal accounts gradually consolidate, especially the mature operations of the enterprise annuity plan. The issue is whether the investment choice should bound to individuals. So it is necessary to summarize the international experience on the individual investment choice, the operation of the new system.2) The paper gives the research based on an international perspective.It gives a comprehensive survey on the implementation of the new system in different countries. The paper analyzes the advantages of the new system and the constraints which the system faces.It is convenient for China to assess the new system comprehensively.