Suppose that in a certain defined benefit pension plan,

1. Employees work for 40 years earning wages that increase at a real rate of 1.5%.
2. They retire with a pension equal to 65% of their final salary. This pension increases at the rate of inflation minus 0.5%.
3. The pension is received for 20 years.
4. The pension plan's income is invested in bonds that earn the inflation rate plus 2%.

Estimate the percentage of an employee's salary that must be contributed to the pension plan if it is to remain solvent. (Hint: all calculations in real rather than nominal dollars.)