Low interest rates and the balance between pay-as-you-go financing and funded pensions

This background document discusses the optimal balance between capital funding and pay-as-you-go financing when calculating in the future with long-term low interest rates and low returns. In particular, the desirability of a shift within the second pillar from capital funding to a ‘Non-financial’ or ‘Notional’ Defined Contribution (NDC) pension as introduced in Sweden at the end of the 1990s and has been growing international interest.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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