This paper provides a framework for comparing a defined benefit (DB) and a defined contribution (DC)
point schemes, which are both pay-as-you go (PAYG) financed. Two stylised PAYG pension schemes are
modelled and simulated to compare their robustness to shocks. The same demographic developments
(distribution of workers by age and revenue and distribution of survival rate by age) are applied to the two
schemes. The impacts of different shocks (productivity, migration and longevity) on the two schemes are
compared. Different policy reforms (increasing the contribution rate, diminishing the pension benefit,
changing the up-rating and increasing the retirement age) to cope with the ageing shock are analysed and
compared.
Comparing the Robustness of PAYG Pension Schemes
Working paper
OECD Economics Department Working Papers
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Abstract
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Working paper20 September 2024
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5 September 2024