This paper deals with the problem of the optimal rate of return to be paid by a defined contribution pension system to its participants’ savings, namely the rate that achieves the goal of the most favorable returns on their contributions jointly with the sustainability of the pension system. We consider defined contribution pension systems provided with a funded component, and for their study we use the “theory of the logical sustainability of pension systems” already developed in several previous works. In this paper, we focus on pension systems in a demographically stable state, whereas the productivity of the active participants and the financial rate of return on the pension system’s fund, rates that constitute the “ingredients” of the optimal rate of return on contributions, are modeled by two stochastic processes. We show that the decisional rule defining the optimal rate of return on contributions is optimal in the sense that it is effective in terms of sustainability, and also efficient in the sense that if the system pays to its participants’ contributions a rate of return that is either higher or lower than the one provided by the rule, then the pension system becomes unsustainable or overcapitalized, respectively.

Many countries are facing up to the problem of the financial sustainability of their pension systems by the transition from the defined benefit scheme to the defined contribution one. However, the defined contribution formula alone does not guarantee sustainability. There are many economic, financial and demographic factors to be taken into consideration, the first of which being the rate of return to be paid on contributions and benefits. This article deals with the shift to the defined contribution scheme in contexts of economic and demographic instability, in which the steady state does not occur substantially, with reference to one of the largest Italian statutory pension systems for professional workers. We propose a new way to structure and manage a pension system on the basis of a general principle, we also provide a proper rule for the rate of return on the pension liability as well as a pension indexation rule differentiated for both defined contribution and defined benefit pensions in order to improve intergenerational equity.

Many countries are facing up to the problem of the financial sustainability of their pension systems by the transition from the defined benefit scheme to the defined contribution one. However, the defined contribution formula alone does not guarantee sustainability. There are many economic, financial and demographic factors to be taken into consideration, the first of which being the rate of return to be paid on contributions and benefits. This article deals with the shift to the defined contribution scheme in contexts of economic and demographic instability, in which the steady state does not occur substantially, with reference to one of the largest Italian statutory pension systems for professional workers. We propose a new way to structure and manage a pension system on the basis of a general principle, we also provide a proper rule for the rate of return on the pension liability as well as a pension indexation rule differentiated for both defined contribution and defined benefit pensions in order to improve intergenerational equity.