The benefit payment model of the public pension personal account system is often defined contribution (DC), which emphasizes the connection between contributions and pension benefits, which is conducive to motivating workers' labor enthusiasm and prolonging their stay in the labor market.

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Under this system, the pension that each insured person can receive in the future is mainly determined by the accumulation (or nominal) amount of his or her personal account.

This system emphasizes the concept that insured persons are personally responsible for their own pension, and lacks redistribution between low-income and high-income earners under the social pooling model.

Defined benefit (DB) pensions are generally determined based on the average salary one or several years before retirement, which is beneficial to people with steeper income curves, and these people tend to have higher lifetime income, thus creating a negative impact on low incomes.

The reverse income redistribution of pensioners violates the original intention of the pension system.

The personal account system avoids this problem through the DC-type benefit payment model.

From a macro perspective, the pension system is a mechanism for allocating national output in a certain period among generations.

From an individual perspective, the pension system is a life cycle income smoothing mechanism.

Faced with the challenge of an aging population, the finances of the traditional pay-as-you-go system are unsustainable. Implementing the NDC model will help achieve the financial stability of the system.

However, when the degree of population aging is serious and the increase in labor productivity is not enough to make up for the pressure brought by the aging population on the NDC system, the pension provided by the NDC system will be difficult to achieve the target replacement rate.

Therefore, nominal personal accounts are often combined with public reserve funds to form the NDC system.

The main difference between FDC and NDC is the financial model. The former belongs to the fund accumulation system, while the latter generally belongs to the pay-as-you-go system (PAYG).

In the context of population aging, in order to maintain the financial balance of the pension system, the ratio of average pensions to average wages can be reduced, the contribution rate can be increased, or the number of retirees can be reduced by raising the retirement age.

The benefit payment model of the PAYG system can be DB type or DC type.

The DB-type PAYG system, the traditional pay-as-you-go system, can transfer the income of the rich to the poor through mutual aid, thereby promoting social equity.

The DC-type pay-as-you-go system, or NDC, emphasizes efficiency because it closely links the insured's contributions and the future pensions received.

The advantages and disadvantages of the pay-as-you-go system and the fund system should be carefully considered.

It should be noted that a country’s pension system generally has multiple levels, and people can obtain pensions from different levels.

Faced with the pressure of an aging population, both the fund system and the pay-as-you-go system are facing risks.

As the population ages, the pay-as-you-go system has to adopt policies to reduce financial deficits.

The fund system is easily affected by capital market risks.

Pension funds are likely to go bankrupt due to cyclical fluctuations in capital markets or economic crises, and the government has to bear the ultimate responsibility.

Many people believe that compared with the fund system, the pay-as-you-go system is more susceptible to political risks.

However, it should be noted that even under the fund system, the government is likely to change the environment in which the pension system operates, thereby exerting influence on the fund system.

Even if a country has implemented a fund system, left-wing governments may challenge this system in the future.

It must be pointed out that as the fund system gradually develops in a country, the scale of pension funds will continue to increase, but individual insured persons have extremely limited control over them, and the government's impulse to tax this fund will continue to increase.

If the government begins to tax pension funds with low elasticity of demand, the likelihood that individual citizens will avoid this tax is extremely low.

In addition, the choice of pension system model will also be affected by the specific national conditions of a specific country.

In the United States, where the legal system is relatively sound and the capital market is well developed, people are more inclined to choose the fund accumulation system; in Central Europe, where many countries have experienced wars, monetary policy reforms, and political system changes, people tend to trust the pay-as-you-go system more.

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