ABSTRACT
This chapter looks at the issues involved in selecting an initial approach and in deciding to change from a pay-as-you-go to an advance funded approach. The debate over the structure of social security pensions involves concerns about both the most desirable structure for the long term and the issues involved in transitions from one approach to another. The structural changes discussed most frequently are those that involve moving away from government-managed, pay-as-you-go, defined benefit pension plans to privately managed, advance funded, defined contribution retirement savings plans. Public policy debates about the evolution of pensions have focused on different topics, taking on different characteristics at various times over the last hundred years. The pace of asset accumulation will depend on the economic environment and the generosity of the pensions being financed. The fiscal challenge of the transition to advance funded individual accounts is finding the resources needed to cover the pension system’s liabilities.
