ABSTRACT

This chapter focuses on various economic, demographic, and institutional factors influencing contribution rates. It deals with an analysis of an intentionally simplified world and examines the impact of introducing additional complicating factors. One major category of differences involves the impact of an uncertain and constantly changing economic and demographic environment. However, contribution rates under each approach become somewhat more sensitive to variations in the economic and demographic environment as the lifespan in retirement lengthens. The contribution rates required for producing a given retirement pension are sensitive to both economic and demographic conditions, but in different ways. One of the more confusing aspects of the debate over the structure of public pensions involves the relationship between pension financing strategies and their associated contribution rates. Administrative costs are the lowest under a mature pay-as-you-go, public retirement system. The highest administrative costs are those associated with the individual savings account approach.