Selected Factors Affecting the Sustainability of the PAYG Pension System

Abstract

Abstract The paper deals with three areas affecting the sustainability of the PAYG pension system. These include the life expectancy, population policy and changes in the population's income structure. Whereas the first two areas have a quantitative character, the third area is a monetary one. The author has deliberately selected some factors essential for the sustainability of the pension system and considers them in a broader context than it is common or than may be found in contemporary literature. This provides him with interesting conclusions affecting the importance of examined factors in relation to the pension system. Even though the paper deals with the data valid for the Czech Republic, some approaches are applicable to any country, as they have a universal character. The author relates the statistical calculation of life expectancy with potential threats of lifestyle diseases. He also mentions that setting the upper limits of pensions, as well as insurance contributions of high-income groups, will not allow for funding the system through engaging high-income groups in the population. If we wished to use this option to secure the sustainability of the system, it is essential to remove the upper limits of both the insurance contributions and pensions as well. Otherwise, the growing share of high-income population will not allow for increasing the income of the pension system and an ever-growing population group will be entitled to the maximum pension which will, in principle, represent an equal pension. The author comes to the conclusion that the fundamental denominator of all three examined areas consists in the education structure whose role tends to be underestimated.