As part of the ULME research semester, MsJulia Eisenberg (Vienna University of Technology) will be talking about “Reforming Public Pensions: A Probabilistic View”.

Date: 25 June 2026

Time: 4.15 pm

Venue: Helmholtzstrasse18, Room 1.20

Ms Eisenberg will be present that afternoon both before and after the lecture. It is possible to join her for lunch or dinner. If you are interested, please contact Ms Sandra Ludwig (sandra.ludwig(at)uni-ulm.de)

Abstract:

Pay-as-you-go (PAYG) pension schemes are particularly vulnerable to demographic risks. This raises serious concerns about the long-term sustainability of public pension systems that rely on a PAYG financing model, where current contributions fund current pension expenditure. In this talk, we explore two potential approaches to reforming such systems.

The first approach assumes that any deficit in the PAYG scheme is immediately covered by the state. In return, individuals are required to invest a specified amount into a fund. This investment is structured such that individuals are expected, with a certain probability, to repay the state for the deficit incurred by the PAYG scheme. We compare the outcomes of this approach with those of the traditional direct contribution model and identify the conditions under which the proposed scheme would be advantageous.

The second scenario introduces a mixed pension framework (PAYG and funded) tailored for economies with a declining working-age population, operating under a defined-benefit assumption. In this setup, we analyse the consequences of guaranteeing a zero return on the investments made in the funded component. Although this mixed system does not provide a hedge against demographic risks, it serves to delay the need for immediate
pension reforms.