Political Stress and the Sustainability of Funded Pension Schemes : Introduction of a Financial Theory

This study introduces multiplayer game in the modern pension market. Particularly, thisstudy claims that low earners and high earners have different interests when playing in fundedpension market scheme. This differentiating is enabled by avoiding the entire society as a singleearning cohort. This study using financial position, demonstrates a socio-economic anomaly in thefunded pension system, which is in favor of high-earning cohorts at the expense of low-earningcohorts. This anomaly is realized by a lack of insurance and exposure to financial and systemicrisks. Furthermore, the anomaly could lead to a pension re-reform back to an unfunded schemesystem, due mostly to political pressure. This study found that a minimum pension guarantee isa rebalance mechanism for this anomaly, which increases the probability of a sustainable pensionscheme. Nowadays when countries try to balance between social expenses and awaking financialmarkets, one may find this theory highly relevant. It is obviously one of the cases where socialtargets meat financial equilibrium and here they are in the same side. Specifically, it is argued thatimplementing the guarantee with an intra-generational, risk-sharing mechanism is the most efficientway to reduce the effect of this abnormality