In most advanced economies, pay-as-you-go (PAYG) pension systems are under enormous pressure as the proportion of older people in the overall population is rising. This increase, also known as demographic change, is often regarded as a one-dimensional phenomenon. In reality, though, demographic change is a combination of several developments occurring simultaneously. The two most important causes are that people are living longer (ageing effect) and that large ”baby boom” cohorts are currently close to retirement (cohort effect) . These two effects differ substantially. The ageing effect is slow and monotonic and will (probably) be sustained. By contrast, the number of births per year and net migration can move in either direction and changes more rapidly over time. The impact of past birth rates and migration on the demographic structure diminishes in the long term, however. This paper illustrates how a longer life expectancy and fluctuating cohort sizes dif- ferently affect PAYG pension systems. More specifically, the paper asks who achieves higher returns due to these effects within a PAYG pension system. Furthermore, the paper answers the question how the type of the PAYG pension system alters the results. For developing sustainable solution for PAYG pension systems it is necessary to separate both effects. To answer the research questions the paper decomposes the effect of demographic change into cohort and ageing effects, taking Germany as an example. A simple theoretical model provides intuition for the underlying mechanisms. It illustrates how the two effects in general alter the payment structure within various kinds of PAYG pensions systems. The paper then applies a large quantitative overlapping generation (OLG) calibrated to the German population. This model shows that differences between the rates of return of cohorts within different PAYG pension systems are economically sizeable. The model also disaggregates the overall rate of return differential into parts stemming from the ageing effect, the cohort effect and a third employment effect originating from the rising labour force participation. Contrary to the widespread view, decreasing mortality rates have an unambiguously positive impact on the rates of return generated within a PAYG pension system. Holding the cohort size at birth constant, a longer life of individuals clearly results in a population increase. In turn, the population increase expands the budget of the pension system. In a PAYG pension system (permanent) expansions result in gains which are distributed depending on the specific pension system. Varying cohort sizes, by contrast, result in winners and losers in PAYG systems. The key difference to the rise in life expectancy is that the impact of a large cohort is transitory. So each expansionary gain to the system is offset in the long run with a loss. However, cohorts benefiting from gains are not necessarily those bearing losses. Overall, the demographic change in Germany has a positive impact on the rates of return participants realize in the German PAYG pension system. The distribution among the cohorts is unequal with a difference 1.3 percentage points per year over the whole life cycle. The cohort that benefited the most is the birth cohort of 1939 with an excess return of 1. 2 percentage points compared to a world without demographic change. The birth cohort of 2026 will have a slightly negative excess return of ？0. 1 percentage points. Most of the excess return is driven by the ageing effect.