Abstract:

The basic pension in China is based on the combination of social pooling and individual accounts， in which the fund model of individual accounts involves the protection of pension accrued rights and pension benefits. However， the government is still considering whether individual accounts should be funded or unfunded. The existing research supporting the funded individual accounts argues that it is better to cope with the aging of the population and that the ownership of individual accounts should be vested in individuals. Scholars who hold opposing views believe that unfunded individual accounts have higher transition costs， which leads to greater pressure on national finance.Through the model and empirical analysis， theoretical support for whether the individual account needs to be funded is provided. In demography， the continuous time OLG model rather than the multi-generation OLG model can depict the dynamic changes in population structure， resulting in better interpretability of the results. With the help of the continuous time OLG model， the model conditions are explored to improve individual accounts. Given the constraints of the funds needed to improve the individual account， the financial pressure faced by the government is simulated under different parameter assumptions and it is concluded that there will be huge financial pressure in the next 5-20 years. Adopting the unfunded and bookkeeping individual account， and setting appropriate account parameters can protect individual accrued and pension benefits and maintain the long-term financial sustainability of the system.

Key words: basic pension, individual account, funded, unfunded, OLG model