The benefit under UFFP also is a flat amount, with the full amount payable on reaching the stipulated age but discounted if early withdrawal of benefits is deemed necessary because of health reasons.
Unlike the laissezs faire regime or the pure MPPF, the UFFP pools longevity risks and minimizes cost.
As a fully-funded scheme, the UFFP, like the MPPF, is free from the risks associated with changes in the dependency ratio and from the political risks of participants trying to extract a larger payout, which may affect a Pay-as-you-go Pension Plan especially if the government is made an automatic contributor along with the employer and the employee.
Compared to a provident fund scheme, which in essence is simply a form of forced savings, the UFFP is likely to result in smaller savings because capital markets are incomplete and imperfect.
Admittedly, the tax-financed subsidies for contribution by the poor under the UFFP also are distortionary.
The proposed UFFP system is predicated on the assumption that each cohort should be responsible for itself so that no generation is burdened with the uncertainty of supporting another given the fact that mortality and demographics change.