Should Public Pensions be Funded?

March 1, 1998

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper outlines some of the arguments for and against the funding of public pensions, with a view to establishing whether there is an economic basis for judging funding to be superior to pay-as-you-go (PAYG). It is argued that funding does not have a clear advantage, and the case for a shift from PAYG to funding is thus an uneasy one. There is nonetheless growing advocacy of funded public pensions as part of an ideal pension system, which raises more general issues about the role of the public sector in pension provision.

Subject: Aging, Economic sectors, Expenditure, Labor, Pension reform, Pension spending, Pensions, Population and demographics, Public sector

Keywords: Aging, aging populations, contribution rate, Eastern Europe, funding, pay-as-you-go, PAYG contract, PAYG financing, PAYG liability, PAYG rate, PAYG scheme, pension liability, Pension reform, Pension spending, Pensions, Public pensions, Public sector, real interest rate, WP

Pages:
35
Volume:
1998
DOI:
https://doi.org/10.5089/9781451845327.001
Issue:
035
Series:
Working Paper No. 1998/035
Stock No:
WPIEA0351998
ISBN:
9781451845327
ISSN:
1018-5941

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