| Abstract: |
This article derives a simple method for projecting pension deficit as percent
of GDP in future years based on commonly available population forecasting and
a few predictable economic and policy variables. Compared with the classic
basic equilibrium equation of pension funds, our new formula decomposes the
retirees-workers ratio which mixes various kinds of impacts into three
more-easily-predictable variables – the elderly dependent ratio, the
prevalence of pension coverage, and the employment rate. Our illustrative
application to China shows that gradually increasing the current low minimum
age of retirement will largely reduce the pension deficit, under various
demographic regimes. The pension deficit as % of GDP in the low fertility
scenarios (which corresponds with keeping the current rigid fertility control
policy unchanged in the longrun)would be 5.6-11.1, 3.8-6.3, and 9.0-13.8 times
as high as that in the Medium Fertility & Medium Mortality scenarios in 2040,
2060, and 2080 |