Generational impacts of demographic changes in pay-as-you-go pension schemes: Measurement and application to the Netherlands

Rising longevity and falling fertility threaten the sustainability of pay-as-you-go pension schemes and have major implications for the distribution across generations. This paper shows that keeping generational accounts of the Dutch pay-as-you-go pension scheme constant since the introduction of this scheme in 1957 in the face of subsequent demographic changes would have required a gradual increase of the entitlement age. For the baby boom generations born between 1945 and 1960, we calculate a required increase in the entitlement age of between four and seven years to offset the generational impact of longer life expectancy and lower fertility.