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Equitable Normal Pension Age Adjusted to Fertility and Migration

In: Quantitative Methods and Data Analysis in Applied Demography - Volume 2

Author

Listed:
  • Tomáš Fiala

    (Prague University of Economics and Business, Department of Demography, Faculty of Informatics and Statistics)

  • Jitka Langhamrová

    (Prague University of Economics and Business, Department of Demography, Faculty of Informatics and Statistics)

  • Jana Vrabcová

    (Prague University of Economics and Business, Department of Statistics and Probability)

Abstract

The logical response to expected continual raise in life expectancy is to increase the retirement age. This increase should be gradual, comprehensible and intergenerationally fair, and the retirement age should be linked to mortality trends. One such option is the idea of equitable normal pension age (the ENPA), which assumes for all cohorts the same relation between the average years of receiving a pension and the number of expected years of economic activity. In many countries, the old-age pension system is based not on the cohort, but on the PAYG principle. A very simple and rough indicator of the financial burden of this system is the adjusted old-age dependency ratio (AOADR) defined as the ratio of the population at retirement age to the population at productive age using the actual retirement age threshold instead of standard 65 years. The ENPA would guarantee the stability of AOADR only in the case of stationary type population, i.e. under fertility at replacement level or adequate compensation of lower fertility by foreign immigration. Otherwise the financial burden of pension system using ENPA would grow in time. The paper shows calculation of ENPA and corresponding AOADR for selected European countries and possible adjustment of ENPA to stabilize the values of AOADR under various variants of fertility and migration development.

Suggested Citation

  • Tomáš Fiala & Jitka Langhamrová & Jana Vrabcová, 2025. "Equitable Normal Pension Age Adjusted to Fertility and Migration," The Springer Series on Demographic Methods and Population Analysis, in: Christos H. Skiadas & Charilaos Skiadas (ed.), Quantitative Methods and Data Analysis in Applied Demography - Volume 2, chapter 0, pages 19-29, Springer.
    • Handle: RePEc:spr:ssdmcp:978-3-031-82279-7_3
    DOI: 10.1007/978-3-031-82279-7_3
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