Working Paper, Department of Economics, Uppsala University 2011:3
The Non-financial (Notional) Defined Contribution (NDC) PAYGO pension scheme is a recent innovation and its generic dimensions have not previously been explored in a coherent context. This paper does this. It derives and analyzes the demographic, economic and distributional properties of NDC. The residual (systematic) longevity risk creates a special problem, solved with an NDC bond, the asset that closes the system financially, transferring residual risk to the government (taxpayers). This guarantees a fixed NDC contribution rate and, thus, intergenerational commitment, with transparent distributional policy pursued through targeted transfers from general tax revenues and taxation of overall personal income.
Pensions NDC Notional Defined Contribution Non-financial Defined Contribution NDC Bond Risk sharing Pension Policy Pay-as-you-go PAYG