Modelling the Influence of Working Career Breaks on Pension Using Retrospective Simulation: A Case of the Baltic States

摘要

The authors demonstrate application of retrospective simulation in comparative analysis of the differences in influences that career breaks exert on pension replacement rates in state old-age pension systems in Estonia, Latvia and Lithuania. Step-by-step model building is described, using historical statistical data from numerous databases and comprehensive analysis of pension regulation. 18 model cases are further considered for each country presenting different wage levels and service record lengths. The results of simulation prove significant dissimilarities in study countries in respect of benefit progressivity and responses to career breaks, caused by differences in their pension systems' designs. The model can be used for increasing financial literacy and educating adults in career development.