Evolution of Pension System Financial Models for Sustainable Economic Growth

Sustainable accumulation of pension rights and increasing of income protection for individuals are central problems for any pension system. Public pension provision in the world practice usually has an earnings-related basis. At least one third of OECD countries has basic minimal pension provision, which depends on the socio-economic policy and financial health of the budgetary system. The development of financial and investment models of pension systems since the creation of the first prototype in Germany has been driven by changes in the gender and age structure of the population, globalization and rapid development of technology. The recession of 2008 and the COVID-19 crisis of 2020 highlighted the vulnerabilities of the global financial system and the risks to the financial stability of pension systems. Pension finances deteriorated during these crises due to lost contributions on wages, which have been mainly covered by state budgets. Automatic adjustment mechanisms in pensions are crucial to deal with the problem ageing. The aim of the study is to analyze the evolutionary vector of development of financial and investment models of pension provision, update and analyze risks for their future development, and justify ways to overcome these risks in the long term. The paper concludes that to adapt pension models to the current challenges of the global economy, it is necessary to improve the quality of public services in the field of social security and optimize the costs of their financing via increasing the quality of the public financial management. It is also necessary to use advantages of technological progress in order to minimize the threats of technological growth to pension systems caused by the industrial Revolution 4.0. This direction will require adaptation, effective adjustment of the financial mechanisms of pension systems, and even qualitative changes in the financing models of the pension system in the long term.