Abstract
This chapter addresses the issue of the financial sustainability of public PAYG pension schemes. Criticalities and, in particular, demographic risks affecting those schemes have been analysed. A possible solution to reduce demographic risk impact is presented, that is the introduction of a funded component to balance the PAYG part when the ratio of contributors-pensioners is decreasing. A cost-benefit analysis is presented in order to verify how the sustainability of a public pension scheme improves, given the actual and future demographic trends, and to quantify the cost in terms of public debt. Finally, an application to Italian pension data is performed.
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Notes
- 1.
The total pensions paid at time t is the sum of the total PAYG and funded pensions at time t: P(t) = PPAYG(t) + PF(t).
- 2.
AL(t) is the present net value of the benefits minus the present net value of the contributions.
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Melis, R., Trudda, A. (2020). Critical Issues of Public Pension System: The Italian Case. In: Peris-Ortiz, M., Álvarez-García, J., Domínguez-Fabián, I., Devolder, P. (eds) Economic Challenges of Pension Systems. Springer, Cham. https://doi.org/10.1007/978-3-030-37912-4_19
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