Thursday, July 06, 2006

Paper and software on pension guarantees

The investment and policy issues connected with DC pension systems in developing countries are particularly hard.

In many countries, debates about pension reform involving DC systems inevitably involve guarantees, and often free guarantees provided by the State.

There is a need for greater insights on the unique problems, and feasible paths, in connection with pension guarantees in developing countries. Towards this end, I have written a paper and a software system named cassandra. The paper offers ideas on the issues, and serves as documentation of the software.

Earlier, I had written a paper on questions of pension guarantees in India [link]. That paper used a home-brewn C code base that nobody could use but me. What has been done now is to generalise this in a way that can be useful to a person in any country.

Now, in any country, it should be fairly easy for a researcher to plug in country-specific parameters into cassandra and get a sound set of analytical inputs for thinking about the costs and benefits of certain important pension guarantee structures. Yes, all models are poor approximations, but in this case I'm very confident that you're much better off flying with a weak model, instead of trying to visualise the implications of alternative guarantee structures by an unaided mind.

cassandra is free software. It requires R, which is also free software. So there should be no impediment for anyone to use this. While the paper is focused on developing countries, the cassandra software is useful in any country.


  1. Quick (and tangential) comment. You write that the R software is available in public domain. (page 11). It is free software, but not public domain, which has specific meaning in many jurisdictions. R is published under GNU GPL.

    I know this is a minor point, but unfortunately, the debate on copyrights is polluted with a large amount of FUD, and clear terminotlogy is essential to reclaiming an informed discussion on these issues.

  2. I don't feel too unhappy about the restrictions of the GPL. I'm sympathetic to the GPL, and I'm sympathetic to people giving out code with no strings attached. It's all public domain to me :-)

  3. hmm this is not directly relevant, but if you are interested in free pensions software, i've written an free Excel Addin called ActXL which allows you to model Defined Benefits schemes - see

    It can't do guarantees yet, but maybe that's something i can add later.


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