How To Make European Pensions Adequate And Sustainable

Presents the results of the research project on Adequacy and Sustainability of Old Age Income in the EU (AIM). Examines the differences among EU member States when it comes to saving for retirement. Suggests that while in some countries the working age population is able to sustain their consumption on retirement, in others there ia a significant saving gap.

This study finds that pension reforms in recent years have improved the efficiency and sustainability of pension systems in the new member states of the European Union and Croatia. However, for many countries, these probably have not gone far enough to ensure long-term sustainability, given the aging of the population. Reforms have included changes to Pay-As-You-Go (PAYG) systems, including increases in retirement ages (not at least for women), new benefit formulas, and new indexation mechanism. Some countries (Latvia and Poland) have further strengthened the link of contributions and benefits to the sustainability of the PAYG system through the introduction of national defined contribution accounts. The link is strengthened also by moving to a point system, which has been adopted by many of the countries. Several countries have introduced a second, private, pension pillar, funded through diversion of part of the pension contributions, thereby diversifying risk. However, some countries (in particular the Czech Republic, Slovenia, and Romania) will need to do more to safeguard the long-term viability of their pension systems, while others face challenges to ensure equitable pension systems and adequate living standards for all elderly people.

The European Commission's Green Paper "Towards adequate, sustainable and safe European pension systems" invites interested parties to submit their views on future pension provision and how the EU can best support national-level efforts. The Paper reviews the current EU pensions framework and goes on to set out the main challenges to providing adequate, sustainable and safe pensions and the priorities for modernising pension policy in the EU. It also looks at the need to improve both pension data collection and EU-level governance of pension policy. Finally, the Paper provides information on how to contribute to the consultation, as well as a glossary of terms and detailed statistical annex. (EU Bookshop).

Europeans are living longer, and fewer now remain in the labour force as they grow older. Many European countries have responded to the ensuing financial pressure by reforming their public pension systems and health care programmes. There is considerable uncertainty as to the effects of these reforms - as they typically do not alter the unfunded nature of public welfare arrangements and this uncertainty is itself costly. Not only does it undermine the credibility of public welfare programmes, but it may also distort labour supply behaviour, decisions regarding savings and capital accumulation. More generally there is uncertainty about the overall impact of ageing on welfare and society and the multiple domains in which its effects may develop. Pensions: More Information, Less Ideology builds on the existing evidence - mostly in the field of public pensions - and highlights the advantages that would be obtained by: harmonising methodologies used in the various countries to report pension outlays and forecast future pension liabilities or more generally public spending; defining common standards as to the frequency of expenditure forecasts and the length of the forecast horizons for welfare expenditures; developing European longitudinal survey of persons pre- and post retirement age, providing timely information on a wide array of decisions by individuals and household related to the ageing process and the ongoing trends.

Several European Councils have highlighted the challenge of an ageing population and its complications for the maintenance of pensions. An open method of coordination on pensions is required. The Laeken European Council launched this process on the bases of safeguarding the capacity of systems, maintenance their financial sustainability and meeting social needs.

Recoge: 1. An introduction to pensions reform- 2. A decade in pension reform in the EU - 3. The impact of the crisis - 4. Policy challenges over the long-term - 5. Policy implications.

Assesses the impact of reforms to pension systems on the twin goals of developing adequate pensions and ensuring the long-term sustainability of pension systems and focuses on the potential risks to full adequacy inherent in pre-funding.