Controlling a demographic wave in defined contribution pension systems

In several developed countries, the baby boomers will come to retire in the next decades. This problem will threaten the sustainability and the intergenerational equity of mandatory pay-as-you-go pension systems because they will have to drain the “demographic wave” of retirees with a relatively small number of contributors. In this paper, we give the operating method developed on the basis of a general principle, which a defined contribution pension system, in a state of stable sustainability, should adopt to control these issues in the presence of a demographic wave. In the theoretical profile, our approach breaks and overcomes the classical juxtaposition between funded and pay-as-you-go pension schemes, carrying out the integration of the two financial methods.