Sustainability of public pension systems

Abstract

The aim of this chapter is to review the main instruments and indicators used to measure the sustainability of PAYG pension systems. It will distinguish between defined contribution and defined benefit systems, due to the various implications that each of them has. It will also be necessary to review the different types of sustainability instruments, for example, those based on cash criteria, financial criteria set by the economic cycle and actuarial criteria. For the actuarial criteria, we will review the criteria of the internal rate of return (IRR) and the actuarial balance. Subsequently, we will review which countries publish official pension system sustainability data and what kind of indicators they choose. We will also use the databases of international organizations to analyse what level of pension system sustainability information is being provided. Finally, we will reflect on the advantages and disadvantages of each of the indicators and set a series of recommendations for the different countries in order to improve the information given on the sustainability of their pension systems.