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What is smoothed PAYG funding?

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asked Nov 9, 2017 in BUS 4027W - Actuarial Risk Management by Rowan (3,200 points)

Can you please explain what excatly is smoothed PAYG?
What I understand is that if under a PAYG unfunded approach enough funds cannot be collected to pay for the benefits as they fall due, then money is taken from this smoothed PAYG fund. Is it basically a reserve?

1 Answer

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answered Nov 9, 2017 by jolegutko (520 points)

Yes, basically - it's a pot of money set aside to smooth fluctuations.