Method of financing old-age provision. In this system, contributions from insured persons are allocated to tied assets, so that the income from this capital stock and the funds themselves pay the respective amounts due.
The fund is set up to cover the claims of the insured persons. – In the assessment system (pay-as-you-go system), on the other hand, no fund is formed, but the contributions of the active insurants (contributors: persons who acquire their entitlements by paying contributions or for whom contributions are deemed to have been paid) are used in the same period to cover the pension entitlements of the passive insurants (all those who have acquired an entitlement in the past but are not yet drawing a pension). Both methods have implications for the financial market. – See qualifying period, balance sheet, holistic, pension fund, pension fund, perenniality, death fund, tontine. – Cf. Deutsche Bundesbank Monthly Report of March 2002, pp. 25 ff. (funded pension plans and their impact on the financial market; overviews), Deutsche Bundesbank Monthly Report of July 2004 (role of insurance companies as financial intermediaries).
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