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Prof. Sergio Nisticò

Contact information:

Term: Second semester

Credits (ECTS): 6

Prerequisites: Economics

Language of Instruction: English

Class hours: 42


Learning Objectives 

Cognitive / Knowledge skills

  • The reasons for a compulsory old-age insurance;
  • The different aims of a pension system and the jargon of pension economics;
  • The ‘little mathematics you need’ and the basic tools of finance;
  • The four archetypal pension systems in a two-overlapping-generations model;
  • Pension rules, fairness and solvency in real-life career patterns;
  • The demographic challenge and the possible responses.

Analytical / Critical Thinking Skills (Oral and Written)

  • Understand the difference between a funded and pay-as-you-go financing methods of a pension system;
  • Understand the different implications of relying on the adjustment of the contribution rate (defined-benefit systems) or of the pension benefit (defined-contribution systems) under varying economic and demographic conditions;
  • Computing growth rates and factors of economic variables and the internal rate of return (IRR) of a series of cash-flows;
  • Assess fairness and solvency of different pension designs;
  • Understand the logic of mortality tables and impact of demographic changes on different pension systems.


This course is taught in the second semester and deals with the functioning of pension systems focusing in particular on the solvency and fairness conditions of different pension designs.

In particular, this course focuses on:

  • The basic concepts of pension economics and the different measures of pension adequacy;
  • How to assess the solvency of pension systems (actuarial balances vs double-entry bookkeeping);
  • The different notions of fairness and how to assess it in different pension designs;
  • The role of pension indexation and the phenomenon of vintage pensions;
  • The emergence of non-financial defined-contribution pension systems as an alternative to privately-managed funded systems;
  • Discretion vs Automatism in adjustments: the so-called point systems;
  • The basics of demography and the effects of worsening demography on pay-as-you-go and funded pension system.

Instructional Format

The class will meet for 2 hours (gross of interclass break), two times a week, for a total of 21 sessions. In every week, one of the sessions will be devoted to exercise and case studies. After an introduction aimed at providing the needed background, participants are required to read the materials related to the class and to be prepared prior to coming to class. Classes will consist of a lecture by the instructor, to be followed by a discussion of the main topics and, possibly, of the assignments.

Tentative course schedule

Week 1 (Textbook, chapter 1)

Introduction to the Course. Presentation of the textbook. Clear Statement of Expected Mutual Requirements. The reasons for a public (compulsory) pension system.

Week 2 (Textbook, chapter 2)

The basic concepts of pension economics.

Week 3 (Textbook, chapter 3)

Growth rates and growth factors. The Internal Rate of Return in different time frames

Week 4 (Textbook, chapter 4)

The two overlapping-generations model.

Week 5 (Textbook, chapter 4)

The non-financial or pay-as-you-go(PAYG) defined-benefit system (NDB) and the financial (funded) defined-contribution system (FDC)

Week 6 (Textbook, chapter 4)

The financial (funded) defined-benefit system (FDB) and the non-financial (pay-as-you-go) defined-contribution system (NDC)

Mid-term review

Week 7 (Textbook, chapter 5)

The earnings-related pensions and their inherent unfairness. The indexation rate and ‘vintage pensions’.

Week 8 (Textbook, chapter 5)

The technicalities of DC personal accounts (PA) pension systems. Computing the so called ‘balance divisors’.

Week 9 (Textbook, chapter 6)

The threat to solvency and adequacy of changes in the age-structure of populations: funded vs PAYG systems

Week 10 (Textbook, chapter 6)

Point systems: the French and the German variants

Week 11 (Textbook, chapter 6)

Different views on pension reforms and the tricky issue of intergenerational fairness. Review.

Workload expectations

All students are expected to spend at least 2.5 hours of time on academic studies outside of, and in addition to, each hour of class time.

Forms of Assessment

The instructor will use various forms of assessment to calculate the final grade you receive for this course. For the record, these are listed and weighted below. The content, criteria and specific requirements for each assessment category will be explained in greater detail in class. Any questions about the requirements should be discussed directly with your faculty well in advance of the due date for each assignment.



Class Participation        


Assignments (being prepared before class)


Mid-Term Exam*


Final Exam




Class Participation:  This grade will be calculated to reflect your participation in class discussions, your capacity to introduce ideas and thoughts dealing with the texts, your ability use language effectively, and to present your analysis in intellectual, constructive argumentation. If you cannot attend classes your participation can be shown by interacting with your instructor during office hours, i.e. by asking about specific subjects of the syllabus and discussing assignments.

Assignments: Students will be required to show their knowledge of the past topics but also of those being discussed before the class starts. Such a knowledge will be tested by asking to solve (in class) exercises on analytical and/or graphing tools, or by discussing one of the focus boxes to be found in the textbook.

Mid Term Exams*: The midterms are designed to establish and communicate to you the progress you are making towards meeting the course learning objectives. Your abilities will be tested in two important areas of competency: the amount of information you master and the accuracy of the information you present.

Structure: A combination of 6 to 10tests on each part, possibly including ‘true or false’, open questions, analytical exercises and graph comprehension. Prior to the examinations, a comprehensive review will be given during class.

Final Exam: Also for the final exam, your abilities will be tested in two important areas of competency: the amount of information you master; the accuracy of the information you present, your ability to apply your knowledge to discussing real-world cases.

Structure: A combination of 10-12 tests, possibly including ‘true or false’, open questions, analytical exercises and graph comprehension. Prior to the examinations, a comprehensive review will be given during class. The final exam will generally include an oral discussion through which the instructor will assess the significance you ascribe to the facts and ideas you have integrated across your study in this course.

*For students not attending classes, the mid-term exams will be waived and the grade will be calculated attributing a 70% percentage to the final exam.


Class/instructor Policies

Professionalism and communications: As a student, you are expected to maintain a professional, respectful and conscientious manner in the classroom with your instructors and fellow peers.

You are expected to take your academic work seriously and engage actively in your classes. Advance preparation, completing your assignments, showing a focused and respectful attitude is expected of all students. Simply showing up for class or meeting minimum outlined criteria will not earn you a good grade in this course. Utilizing communications, properly addressing your faculty and staff, asking questions and expressing your views respectfully demonstrate your professionalism and cultural sensitivity.

Attendance and classroom behavior: Although attendance is not compulsory, it is highly recommended. All students must have a respectful attitude towards the professor as well as the classmates.

Arriving late / departing early from Class: Once they have decided to attend, students must behave consistently. Arriving late or leaving class early is disruptive and shows a lack of respect for instructor and fellow students.

Make-up classes: The instructors reserve the right to schedule make-up classes in the event of an unforeseen or unavoidable schedule change. Make-up classes may be scheduled outside of typical class hours, as necessary.

Missing examinations: Examinations will not be rescheduled. Pre-arranged travel or anticipated absence does not constitute an emergency and requests for missing or rescheduling exams will not be granted.

Use of cell phones, laptops and other electronic devices: Always check with your instructors about acceptable usage of electronic devices in class. Inappropriate usage of your electronic devices will result in a warning and may lead to a deduction in participation grades. Use of a phone either to take pictures or to send/receive phone calls, text messages, emails or any other purposes during class is impolite, inappropriate and hence prohibited. Faculty determines whether laptops will be allowed in class. The use of a laptop, tablets or of cell phones is prohibited during all tests and exams, unless otherwise specified by your instructor.

Required Readings

Required texts:

  • Nisticò, S. Essentials of Economics, Palgrave Macmillan.
[Ultima modifica: martedì 19 gennaio 2021]