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The Basic Concepts

Sergio Nisticò

Chapter Chapter 2 in Essentials of Pension Economics, 2019, pp 5-25 from Springer

Abstract: Abstract Consumption smoothing throughout the lifecycle and poverty preventing are two fundamental goals of pension systems. The former has traditionally been played by Bismarckian, earnings-related pensions, the latter by Beveridgean, flat-rate pensions. Alternatively, pensions can be computed through personal accounts recording either monetary contributions paid in the system or ‘points’ earned in one way or another before retirement. Fully funded systems always have enough assets invested in the financial markets to extinguish all their liabilities towards workers and retirees. Pay-as-you-go (PAYG) systems have no assets and extinguish their liabilities by resorting to the contribution revenues. Under changing economic and demographic conditions, defined benefit systems ensure solvency by adjusting the contribution rate charged on active workers, whereas defined contribution systems automatically adjust expenditures to the varying contribution revenues.

Keywords: Consumption smoothing and poverty preventing; Bismarckian earnings-related and Beveridgean flat-rate benefits; Pay-as-you-go and funded pension systems; Defined benefit and defined contribution pension systems; Personal accounts (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-26496-3_2

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DOI: 10.1007/978-3-030-26496-3_2

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