Pay-as-you-go, funded, sovereign fund: what about our neighbours?

We’ve spent six episodes inside the French system. To close, let’s step back: do others do better? The honest answer fits in one sentence — there is no pure model, neither 100% pay-as-you-go nor 100% funded. Every country mixes pay-as-you-go and funded pensions, in very different doses. And the most stubborn cliché — “Norway pays its pensions with its sovereign fund” — is simply wrong.

7th and final episode. The French architecture (episode 1) serves as the point of comparison.

The names change from one country to the next, but the idea is always the same: a mandatory public base (most often pay-as-you-go) and, on top, a larger or smaller dose of funding. The table below gives, for each country, the local name of the base and what is added to it.

United States: modest pay-as-you-go, massive funding

In the US, the public base — Social Security — runs pay-as-you-go, funded by a payroll tax of 12.4%, split employer/employee; the full retirement age is 67. But that base is deliberately modest — and fragile: its financial reserve (the fund that cushions the gap between contributions and pensions) is projected depleted around 2032, which would bring pensions down to ~78% of what’s promised if nothing is done (≈ 83% including the disability branch, around 2034)¹.

On top, America relies heavily on private funding: employer 401(k) plans and individual IRA accounts, invested in markets. It’s the mirror image of the French setting: a State that does little, a private sector that does a lot.

Netherlands: the funding champion

The Netherlands combines a flat-rate pay-as-you-go state pension (which they call the AOW) with one of the world’s most powerful funded occupational 2nd pillar: pension fund assets reach around 191% of GDP (2019)² — nearly two years of national wealth set aside for pensions. The result is one of the OECD’s best replacement rates — on the order of 96% net for an average wage². The flip side: an exposure to markets that the 2023 reform (the “Wet toekomst pensioenen” law) fully embraces, shifting toward defined contributions — the pension is no longer guaranteed in advance, it depends on what the contributions return, so market risk weighs more on the saver.

Switzerland: the three pillars, spelled out

Switzerland is the textbook case of the multi-pillar pension system, displayed as such: 1st pillar AVS (pay-as-you-go), 2nd pillar LPP (mandatory funded, ~166% of GDP in assets), 3rd pillar of optional private savings³. The mandatory minimum offers a modest gross replacement rate (~40%); it’s the sum of the three that secures the standard of living. A legible architecture, where everyone sees what pay-as-you-go and funding each contribute.

Norway: the myth of the fund that pays the pensions

This is the most widespread confusion, and it must be cleared up. Norway holds the world’s largest sovereign fund, the Government Pension Fund Global (the GPFG, ~$1.7tn, managed by the investment arm of Norway’s central bank). “Pension Fund” in the name: many conclude it pays Norwegian pensions. It does not.

Current pensions are paid by Folketrygden, the national insurance — a pay-as-you-go system, as in France. The GPFG is a sovereign wealth fund fed by oil revenues: a fiscal rule (the handlingsregel, in place since 2001) lets the State draw, on average, only the equivalent of the expected real return, ~3% per year, paid into the general budget⁴. It’s a buffer for future generations, not a fund that pays out pensions.

The lesson is twofold: a sovereign fund isn’t funded pensions in disguise, and no wealthy country “pays its pensions with oil” without going through taxes and pay-as-you-go.

And France in all this?

The tour reframes the French case. France is pay-as-you-go-dominant, with marginal funding — where the Netherlands and Switzerland bolt a huge funded pillar onto their public base. Neither path is “free”: funding exposes you to markets (and shifts risk onto the saver, see the Dutch reform), pay-as-you-go exposes you to demographics (see our six previous episodes).

That’s precisely where individual retirement savings make sense in France: not to replace pay-as-you-go, but to add a chosen dose of funding on top. That’s the subject of our French-language series on tax wrappers , and of the article on workplace savings (company savings plans, collective and mandatory PER) — the “funded” counterpart to everything we’ve just described.

Key takeaways

• No pure model: every country blends pay-as-you-go and funding, in different doses.
• US: modest pay-as-you-go (Social Security, financial reserve heading for depletion) + large private funding (401(k), IRA). Netherlands / Switzerland: public base + giant funded pillar (~190% / ~166% of GDP).
• Norway: the sovereign fund does not pay current pensions (pay-as-you-go via folketrygden); it tops up the budget via the ~3% rule.
• France: pay-as-you-go-dominant, funding marginal and optional — hence the value of retirement savings as a complement, never a replacement.

End of the series “The French pension system”. Seven episodes to understand, not to campaign: pay-as-you-go, the schemes (from the largest to the smallest), and what our neighbours do. The next move is on the funded side — in the series on tax wrappers.

This article is general information and does not constitute advice. The rules and figures cited are those known in mid-2026 and change over time.