Estimation of yield rates in pay-as-you-go pension system

Age of society is increasing, so supplementary pension system is becoming more and more relevant topic. Therefore, there is an issue what income the public pension’s scheme provides for a retired person. The goal of the final paper is to offer information about rate of return of Pay-as-You-Go Pension System in Lithuania. The public pension rate in Lithuania is described; also, it is provided rate of return of public pension, which is calculated in several different methods, like internal rate of return, money‘s worth ratio, tax-benefits ratio, repayment time and net subsidy. A description of made assumptions, which influence calculation and results, are given. Depending on the number of employed people and their incoming salary (based on statistics in 2015) rate of return of several cohorts is estimated in different cases (1996 and 2013); also, the return for individuals (men and women separately) is calculated. Furthermore, some alternative estimation which compute rate of return for workers on the basis of the individual (the individual activities certificate and a business certificate) are provided. Stochastic calculations are accomplished and an average of present value of cash flow while being involved in pension scheme is rated. Eventually, the findings are made, such as rate of return is decreasing while earning higher wages; rate or return is higher for women then for men; also, it is higher for cohort then for individual; expectations of the individual have a big influence for the minimum required return (discount rate)