A key issue in pension reform is whether such a shift from PAYG to funding is largely a
matter of reallocation of the financial burden of ageing (with the risk of a generation paying twice), or
whether funding improves economic performance sufficiently to generate the resources required to
meet the needs of an ageing population. This paper surveys the literature on the three main aspects of
this question, whether pension funding boosts saving, whether it improves the supply of long term
funds and whether there are improvements in allocative efficiency in capital and labour markets. It
also provides new evidence on the positive benefits of funding for productivity growth, which can
offset the deleterious effects on productivity that ageing may hav
