Correspondence: Jan B. Kuné, ABP Pension Scheme, PO Box 4874, 6401 JP Heerlen, Netherlands. Tel: 31-45-5792005; Fax: 31-45-5797017; E-mail: E. jan.kune@apg.nl

¹is a senior research fellow at the ABP or the Public Employees' Pension Fund in the Netherlands and professor of the economics and finance of pensions at the Department of Economics at the University of Amsterdam. He writes widely on population aging and pension subjects. He holds a PhD from the University of Amsterdam. Kuné began his career at the Institute for European Studies of the Amsterdam University in 1968, moving to the Dutch Central Bank in 1970. He joined the Royal Tropical Institute in 1975 and worked as an epidemiologist in Indonesia and Kenya. While working towards his PhD, he was associated with the Amsterdam University again from 1978 till 1988 and taught undergraduate actuarial science. Since 1988 he is with the ABP Pension Fund. He is associated again with Amsterdam University since 2003 as a professor in pension science. A prolific researcher, he has authored many publications in European economic integration, monetary economics, epidemiology, disability, accident proneness, pension finance, pension history and the economic aspects of population aging and old age pension provisions.

Received 21 June 2008; Revised 21 June 2008.

Abstract

The present paper presents a useful algorithm for calculating the costs of a pension plan, funded or pay-as-you-go-based, that can easily be employed by everyone interested in pensions and its finance on his own pc at home using the widely available Excel tool. Exercises with the model show that the finances of a funded pension scheme are very sensitive to the economic assumptions made, like investment returns and inflation. They are far more sensitive to economic conditions than to actuarial conditions like mortality rates and other decrement rates. A pay-as-you-go-based scheme on the other hand appears to be very sensitive to population growth.