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Sustainability and adequacy of pensions in EU countries. A cross-national perspective

24th February 2012 11am, University of Southampton 58/3017

Asghar Zaidi, European Centre for Social Welfare Policy & Research

A joint CPC and Centre for Research on Ageing Seminar.

Although shocks to global economic systems caused by the financial near meltdowns in 2008 and 2009 have receded, the effects will remain with us for decades to come. National economies are now saddled with structural debts, partly as a result of policy choices made over the boom years and partly in pursuing (the unavoidable) expansionary policies during the recession. The effect of unemployment as well as the cutbacks required for budgetary consolidations on the vulnerable groups of the society, particularly children and pensioners but also people with disabilities, could run deep. Such questions as were asked by Paul Gauguin at the turn of 19th century - D'ou Venons Nous / Que Sommes Nous / Ou Allons Nous (Where Do We Come From? What Are We? Where Are We Going?) - are particularly pertinent for EU's policymakers in the current times. It is now the time to carefully frame the answers to his third question - our future direction, and the welfare of our pensioners in the 2040s, 2050s and onwards. While recognising that each of the European countries will have its own approaches, there is a need to ensure that its processes are based on sound economic, financial and fiscal fundamentals. And also, the pension system elements are properly planned and executed, having learned useful lessons from the crisis. A review of fundamentals is also essential especially in making a fresh assessment of the social objectives aimed at in the pension policy, and to re-examine whether, and how, recent policy reforms compromise the pension income adequacy of future retirees, and what policies can potentially improve both the fiscal sustainability of public pension systems and the adequacy of pension incomes for future pensioners.

The shape and design of future pension policy, and how that policy will be influenced by choices made now in response to the current fiscal crisis and impending population ageing challenges will impede the welfare of future pensioners, will be discussed in this presentation. The presentation will come in five parts. Part 1 will set the context by highlighting sustainability challenges arising from population ageing, and the financial, fiscal, and economic crises. Part 2 will analyse the aggregate impact of pension reforms, using the indicator 'Benefit Ratio' (average public pensions as a ratio of average economy-wide wage), as calculated by the Working Group on Ageing of the EU's Economic Policy Committee, for the period 2007-2060. Part 3 will extend the discussion on pension income adequacy by examining how pension reforms have reshaped the structure of pension systems across EU countries. These impact?of?pension reforms results are derived from the simulations for stylised workers, undertaken by OECD in 2009. The next part (Part 4) will present micro evidence on changes in the entitlement of public pension income during the period 2006?2046. The indicator in use is the net 'Theoretical Replacement Rate', as provided by the Indicators Sub?Group of the EU's Social Protection Committee. Like OECD calculations, it is calculated for stylised workers, approximating impact of pension reforms for the income entitlement of future retirees. Part 5's concluding summary will discuss policy challenges that EU countries face going forward, with a focus on pension policy challenges as well as the fiscal and labour market policy.

Download Presentation File 1 (mp4 format)