Simulating a Transition Process to Generation-based Funding Scheme in Public Pension Planning

In this paper, we propose a transition method of the public pension system in Japan to generation-based funding scheme from pay-as-you-go scheme. During the transferring period, the people who were born before 1989 remain to join the present system of pay-as-you-go scheme and the people who were born after 1990 join the new system of generation-based funding scheme in turn. Shortage of fund for the present system is covered by the reserve for uncertainty in the new system. If the reserve for uncertainty became minus, it would be covered by the national treasury.