Adequacy, Fairness and Sustainability of Pay-As-You-Go-Pension-Systems: Defined Benefit Versus Defined Contribution

The European Journal of Finance. Available online: Doi: 10.1080/1351847X.2017.1399429

29 Pages Posted: 21 Sep 2016 Last revised: 15 Nov 2017

See all articles by Jennifer Alonso-García

Jennifer Alonso-García

Université Libre de Bruxelles (ULB) - Department of Mathematics; ARC Centre of Excellence in Population Ageing Research; Netspar

María el Carmen Boado-Penas

University of Liverpool

Pierre Devolder

Catholic University of Louvain

Date Written: July 3, 2017

Abstract

There are three main challenges facing public pension systems. First, pension systems need to provide an adequate income for pensioners in the retirement phase. Second, participants wish a fair level of benefits in relation to the contributions paid. Last but no least, the pension system would need to be financially sustainable in the long run. In this paper, we analyse defined benefit versus defined contribution schemes in terms of adequacy, fairness and sustainability jointly. Also, risk sharing mechanisms, that involve changes in the key variables of the system, are designed to restore the financial sustainability at the same time that we study their consequences on the adequacy and fairness of the system.

Keywords: Pay-as-you-go, Public pensions, Risks, Sustainability

JEL Classification: E62, H55, J26

Suggested Citation

Alonso-García, Jennifer and Boado-Penas, María del Carmen and Devolder, Pierre, Adequacy, Fairness and Sustainability of Pay-As-You-Go-Pension-Systems: Defined Benefit Versus Defined Contribution (July 3, 2017). The European Journal of Finance. Available online: Doi: 10.1080/1351847X.2017.1399429, Available at SSRN: https://ssrn.com/abstract=2841223 or http://dx.doi.org/10.2139/ssrn.2841223

Jennifer Alonso-García (Contact Author)

Université Libre de Bruxelles (ULB) - Department of Mathematics ( email )

Brussels
Belgium

ARC Centre of Excellence in Population Ageing Research ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

María del Carmen Boado-Penas

University of Liverpool ( email )

Liverpool
United Kingdom

Pierre Devolder

Catholic University of Louvain ( email )

Place Montesquieu, 3
B-1348 Louvain-la-Neuve, 1348
Belgium

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