ABSTRACT
The importance of mid-career changes in the economic and demographic environments depends on how unpredictable actual trends turn out to be and how wide the fluctuations are from one year to the next. The contribution rates needed to finance a given pension are determined by the economic and demographic environment, but the particular way in which that environment influences pension contributions depends on the type of pension institution. The range of the variation in the economic and demographic environment in the relatively stable years was enough, however, to introduce substantial uncertainty into the operation of any of the pension approaches. Misestimates of the required contribution rates have quite different implications under different pension approaches. The objective of the exercise is to apply plausible decision rules about how contribution rates would be set and see how close people come to achieving the target pension.
