pay-as-you-go pensions
pay-as-you-go pensionsSchemes where the pensions of the retired are paid for by their former employers, by contributions from those still in employment, or from general taxation. Pay-as-you-go pension schemes are contrasted with funded pension schemes, where current pensions are paid out of a fund built up from contributions during their working lives by members or their employers. A funded pension scheme might be preferable, as the pension fund could be invested, thereby increasing national capital and hence national income. If a country starts from a pay-as-you-go pension scheme, changing over to a funded scheme is difficult, since those whose working lives fall in the transition period will have to pay twice over, once to pay the pensions of the previous generation and again to build up a fund to pay their own pensions.
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