Due to the demographic development public pension systems in the European Union organized on a
pay-as-you-go (PAYG) principle will be forced to either raise contribution rates or taxes
shorten future replacement rates or enforce a combination of both. In this regard two
important issues have to be addressed: The first issue refers to the question of measuring the
public pension liabilities of private households until today. The extent of these liabilities
has an impact on the saving behaviour. The second issue refers to the consequences of the
demographic development for future retirees and contributors and examines the sustainability of
pension schemes by confronting the present value of future pension payments with the present
value of future contributions.
