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date: 22 August 2019

Abstract and Keywords

Government-mandated pensions have become increasingly popular since the early 1980s. The idea of mandating individual pensions arose largely as a response to problems that affect traditional PAYG schemes, demographic change, and from governments' desire to maintain a role in their citizens' retirement arrangements. Mandated pension schemes exhibit significant differences, yet all follow the same general framework: workers have individual pension accounts to which they or their employers both make compulsory and periodic defined contributions from their employment income. These amounts accrue until retirement, and then become available for consumption. This article deals with the context and impetus for mandated pensions, using existing national programs for illustration where possible, and addresses three questions. The argument is that the demographic transition has primarily been responsible for the development of mandated pension schemes, and that three core types have emerged as a response: funded defined contribution plans – with and without private- sector involvement – and the government-managed, but unfunded, variety.

Keywords: PAYG schemes, mandated pensions, demographic change, individual pension accounts, employment income, defined contribution plans

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