The article explores the impact of pension reform on different ability groups in an economy. It suggests that a pay-as-you-go pension system with a strong link between individual labor income and pension benefits is most beneficial for promoting employment, growth, and overall welfare. However, this system may lead to welfare losses for low-ability individuals and increased inequality. Including basic or minimum pension components can help low-ability generations, but it may harm aggregate welfare, employment, and growth. The best approach is to maintain the link between labor income and pensions for low-ability individuals while increasing their replacement rate.