MOVING TOWARD FUNDED PENSION SCHEME: PURE ECONOMIC ARGUMENT DUE TO POPULATION AGING OR RESPONSIBILITY ABDICATION OF GOVERNMENTS?
MOVING TOWARD FUNDED PENSION SCHEME: PURE ECONOMIC ARGUMENT DUE TO POPULATION AGING OR RESPONSIBILITY ABDICATION OF GOVERNMENTS?

Summary/Abstract: This study adopts a unique angle towardsexploring pension plans in a modern western marketinfluenced by aging. In particular, much weight has beenattributed to the effects of the Covid-19 pandemic crisisand frequent market turmoil. The full set of playersinvolved in the pension system has been considered withits different interests among both the current and futuregenerations In addition, we factor in the difference amongearning cohorts. By using the overlapping generationsmodel and Monte Carlo simulations, we note that in a widemacroeconomic range, pension equilibrium among themarket's players lies with the unfunded pension schemedespite the significant influence of aging. Contrary to theclassic economic arguments presented by the World Bankand IMF, ideas that were widespread during the 1980s and1990s, the choosing of pension system is much morecomplex. Public administrations must take into accountnot only the aging rhythm and market expected yields butalso other parameters, such as the current and future utilityperspective, the government's debt price, GDP per capitagrowth rate, risk aversion, and the possibility of marketturmoil.

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