Public pension funds management type: Pay as you go (PAYG)

Abstract

This article is based on the analysis of pay as you go (PAYG) pension funds type, which Barr and Diamond used to establish a set of principles for pension design in economic theory. Considering this analysis, this study tried to demonstrate the PAYG pension system type as a degree of bearing the expenditure of generations which can not be seen as a zero algebraic sum. This is so for the simple reason that some generations bear the high costs (or lower) depending on their income made ​​to support the retired generation, but could take advantage of their low support (or higher) when they get to retirement age. The findings lead to the belief widely recognized that in current conditions, to maintain reliability, these systems should become a mandatory mix of systems necessary for a proper balance between generations, particularly in low-income countries. Key words: Pension, social insurance, pay as you go (PAYG) system.