Pay-as-you-go system

The pay-as-you-go system is a procedure in which an interested group of people raises funds for a specific purpose in order to pay them back to the respective parties if necessary. In the case of cooperatives, the pay-as-you-go system is used to distribute the shares that exceed the additional contributions to the members.

The pay-as-you-go system is used in Germany for statutory social insurance, health and unemployment insurance and old-age provision. The contributions of the insured are to be calculated in such a way that they cover expenses incurred within the relevant period.

However, it is often criticized that the pension insurance co-financed non-insurance benefits, such as the costs of the reunification of Germany or the war invalidity pension.

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