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Optimal mix of funded and unfunded pension systems: The case of Luxembourg

Authors
  • Guigou, Jean-Daniel1
  • Lovat, Bruno
  • Schiltz, Jang
  • 1 Associate Professor of Finance, University of Luxembourg, LSF 4, rue Albert Borschette, Luxembourg, L-1246 , Luxembourg
Type
Published Article
Journal
Pensions: An International Journal
Publisher
Palgrave Macmillan UK
Publication Date
Nov 01, 2012
Volume
17
Issue
4
Pages
208–222
Identifiers
DOI: 10.1057/pm.2012.23
Source
Springer Nature
Keywords
License
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Abstract

Financing of the Luxembourg pension system is based on a pay-as-you-go (PAYG) system and hence on an intergenerational contract. As is the case for most other European countries, this system will be exposed to the effects of demographic ageing over the coming decades. The aim of this article is to develop a model that allows evaluating the efficiency of a diversified pension system financed partly by a PAYG scheme and partly by capitalization. The efficiency is measured by the long-term sustainability of the system. We compare the sustainability of our model with the one of a pure PAYG system.

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