Social insurance based on personal savings

Many countries have reformed, or plan to reform, their pension system. The trend is to move from an entitlement based system to a system in which cont ributions accumulate in some form of personal savings account. In recent ye ars proposals have been made to apply a personal savings account also to ot her elements of social insurance, such as unemployment insurance, social as sistance, health care costs and others. This paper presents a simple model and a simulation to compare the lifetime consequences of replacing a wide r ange of social insurance systems with savings account based social insuranc e. The results indicate that savings account based social insurance can be designed to provide the same economic security as offered by a generous wel fare state, and yet lower marginal taxes considerably.