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<p>The formal relationships between the contribution rate of workers and the pension level are modelled in the pay-as-you-go system. The average pensioner has paid contributions over 36 years and currently receives EUR 1,246.67 as a monthly pension. The “standard pensioner” contributed over 45 years and receives a “standard pension” of EUR 1,692. The real pension level is 42.6% and thus falls short of the 48% target level. In the pay-as-you-go system, the monthly pension would only amount to EUR 1,203.66. Higher contributions reduce average wages relatively less than they increase the pension benefits. A redistribution within the pool of insured people should compensate for the shorter payment periods of below-average pensions.</p>
</abstract>

The formal relationships between the contribution rate of workers and the pension level are modelled in the pay-as-you-go system. The average pensioner has paid contributions over 36 years and currently receives EUR 1,246.67 as a monthly pension. The “standard pensioner” contributed over 45 years and receives a “standard pension” of EUR 1,692. The real pension level is 42.6% and thus falls short of the 48% target level. In the pay-as-you-go system, the monthly pension would only amount to EUR 1,203.66. Higher contributions reduce average wages relatively less than they increase the pension benefits. A redistribution within the pool of insured people should compensate for the shorter payment periods of below-average pensions.

The Pay-as-you-go System: Idea and Reality

Wirtschaftsdienst

This work is licensed under the Creative Commons Attribution 4.0 International License.

Das Umlageverfahren: Idee und Wirklichkeit

The formal relationships between the contribution rate of workers and the pension level are modelled in the pay-as-you-go system. The average pensioner has...

The Pay-as-you-go System: Idea and Reality

Published Online: Feb 22, 2024

Page range: 92 - 97

DOI: https://doi.org/10.2478/wd-2024-0030

© 2024 Fritz Helmedag, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.