Intergenerational redistribution of income through capital funding pension schemes: simulating the Dutch pension fund ABP
In most countries, the largest proportion of the pension benefits that are paid out to the elderly are brought together by the contributions of the active population. This type of financing is known as a Pay-As-You-Go-scheme. In this scheme, an important ‘chain of solidarity' covers for the pension of the preceding generation. So, there is a pattern of winners and losers that is caused by the rates of ageing of the populations, in combination with PAYG-pension schemes. In pension schemes based on the Capital Funding (CF) type, individuals of every generation build up a certain future pension claim. So, every generation builds up its own future pension benefit in this type of scheme. Hence, CF pension schemes are believed not to rely on income flows between generations, since every generation finances its own future pension. The advantage then is that there are no winners or losers, from the generational point of view at least, so that demographic developments cannot jeopardize the system. But, this only holds for Defined-Contribution (DC) pension systems. In practice, we also observe Defined-Benefit (DB) pension systems. In fact, the larger part of the occupational pensions schemes in the Netherlands are DB ones. For this type of schemes it holds that absence of intergenerational income flows is a too optimistic view, though the redistribution is not that strongly as in the case of PAYG schemes. The central question in this contribution is whether intergenerational redistribution of income occurs via Capital Funding in case of DB pension schemes in the Netherlands. To that end we analyse the Dutch civil servants' pension fund in the Dutch dynamic microsimulation model NEDYMAS.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Creedy, John, 1991. "Lifetime Earnings and Inequality," The Economic Record, The Economic Society of Australia, vol. 67(196), pages 46-58, March.
- Nelissen, J.H.M., 1995.
"Annual versus lifetime income redistribution by social security,"
95.05.008/2, Tilburg University, Work and Organization Research Centre.
- Nelissen, Jan H. M., 1998. "Annual versus lifetime income redistribution by social security," Journal of Public Economics, Elsevier, vol. 68(2), pages 223-249, May.
- BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, .
"Pay-as-you go social security in a changing environment,"
CORE Discussion Papers RP
-961, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1991. "Pay-as-You-Go Social Security in a Changing Environment," Journal of Population Economics, Springer, vol. 4(4), pages 257-80, November.
- Boadway, R. & Marchand, M. & Pestieau, P., 1990. "Pay-as-you-go social security in a changing environment," CORE Discussion Papers 1990054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dekkers, Gijs J M & Nelissen, Jan H M & Verbon, Harrie A A, 1995.
"Intergenerational Equity and Pension Reform: The Case of the Netherlands,"
Public Finance = Finances publiques,
, vol. 50(2), pages 224-45.
- Dekkers, G.J.M. & Nelissen, J.H.M. & Verbon, H.A.A., 1995. "Intergenerational equity and pension reform : The case of the Netherlands," Other publications TiSEM 138e04cc-4bec-4782-b2b4-5, Tilburg University, School of Economics and Management.
- Creedy, John, 1994. "Pensions and Compensating Wage Variations," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(4), pages 454-63, November.
- David Miles & Allan Timmermann, 1999. "Risk sharing and transition costs in the reform of pension systems in Europe," Economic Policy, CEPR;CES;MSH, vol. 14(29), pages 251-286, October.
- Harrie Verbon & Marijn Verhoeven, 1992. "Decision making on pension schemes under rational expectations," Journal of Economics, Springer, vol. 56(1), pages 71-97, February.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36137. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.