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“Better Safe than Sorry” - Individual Risk-free Pension Schemes in the European Union - Macroeconomic Benefits, the Mobile Working Citizen’s Perspective and Why Nots

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  • Peeters, Marga

Abstract

Variations between the diverse pension systems in the member states of the European Union hamper labour market mobility, across country borders but also within the countries of the European Union. From a macroeconomic perspective, and in the light of demographic pressure, this paper argues that allowing individual instead of collective pension building would greatly improve labour market flexibility and thus enhance the functioning of the monetary union. I argue that working citizens would benefit, for three reasons, from pension saving in a risk-free savings account. First, citizens would have a clear picture of the accumulation of their own pension savings throughout their working life. Second, they would pay hardly any extra costs and, third, once retired they would not be subject to the whims of government or other pension fund managers. This paper investigates the feasibility of individual pension building under various parameter settings by calculating the pension saved during a working life and the pension dis-saved after retirement. The findings show that there are no reasons why the European Union and individual member states should not allow individual risk-free pension savings accounts. This would have macroeconomic benefits and provide a solid pension provision that can enhance mobility, instead of engaging workers in different mandatory collective pension schemes that exist around in the European Union.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33571.

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Date of creation: 20 Sep 2011
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Handle: RePEc:pra:mprapa:33571

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Keywords: pensions; labour market; monetary union; mobility; migration;

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  1. Marga Peeters & Loek Groot, 2012. "A Global View On Demographic Pressure And Labour Market Participation," Journal of Global Economy, Research Centre for Social Sciences,Mumbai, India, vol. 8(2), pages 165-194, June.
  2. Börsch-Supan, Axel, 2006. "European welfare state regimes and their generosity towards the elderly," Sonderforschungsbereich 504 Publications 07-24, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  3. Richard Hinz & Heinz P. Rudolph & Pablo Antolin & Juan Yermo, 2010. "Evaluating the Financial Performance of Pension Funds," World Bank Publications, The World Bank, number 2405, October.
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  6. Marga Peeters & Ard den Reijer, 2014. "Coordination versus flexibility in wage formation: a focus on the nominal wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States," Applied Economics, Taylor & Francis Journals, vol. 46(7), pages 698-714, March.
  7. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
  8. Peter A. Diamond, 2000. "Administrative Costs and Equilibrium Charges with Individual Accounts," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 137-172 National Bureau of Economic Research, Inc.
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  11. Razin, Assaf & Sadka, Efraim, 1999. "Migration and pension with international capital mobility," Journal of Public Economics, Elsevier, vol. 74(1), pages 141-150, October.
  12. Olivia S. Mitchell, 1996. "Administrative Costs in Public and Private Retirement Systems," NBER Working Papers 5734, National Bureau of Economic Research, Inc.
  13. Paul Cavelaars & Jeroen Hessel, 2007. "Regional Labour Mobility in the European Union: Adjustment Mechanism or Disturbance?," DNB Working Papers 137, Netherlands Central Bank, Research Department.
  14. Holzmann, Robert & Palacios, Robert, 2001. "Individual accounts as social insurance : a World Bank perspective," Social Protection Discussion Papers 23303, The World Bank.
  15. van Groezen, Bas & Kiiver, Hannah & Unger, Brigitte, 2009. "Explaining Europeans' preferences for pension provision," European Journal of Political Economy, Elsevier, vol. 25(2), pages 237-246, June.
  16. Peter Huber, 2004. "Inter-regional Mobility in Europe. A Note on the Cross-Country Evidence," WIFO Working Papers 221, WIFO.
  17. Van Vliet, Olaf & Been, Jim & Caminada, Koen & Goudswaard, Kees, 2011. "Pension reform and income inequality among the elderly in 15 European countries," MPRA Paper 32940, University Library of Munich, Germany.
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