220 - Stabilizing pay-as-you-go pension schemes in the face of rising longevity and falling fertility: an application to the Netherlands

DNB Working Papers
Date 21 August 2009

Rising longevity and falling fertility threaten the sustainability of pay-as-you-go pension schemes. This paper shows that maintaining the intergenerational balance in the Dutch pay-as-you-go pension scheme in the face of increased longevity since the introduction of the scheme in 1957 would have required a gradual increase of the retirement age to at least 68 years for the generation born in 1945. Furthermore, we show that projected increases in labour-force participation rates do not generate sufficient additional tax revenues to subsitute for the dearth of human capital caused by falling fertility rates. J.E.L Classifcation: H5  Keywords: public pension; pay-as-you-go system