IDEAS home Printed from
   My bibliography  Save this paper

Pension financing and individual retirement account


  • Arno Baurin

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Jean Hindriks

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))


In this article, we analyze the Belgium pension financing in retrospect for the period 1995-2017 and then we provide a prospective analysis based on the demographic and economic projections of the Federal Plan Bureau. In the retrospective part, we point out the growing importance of alternative financing relative to the social security contributions. The decomposition of the public pension growth over the last decade between the average pension and the number of retirees shows that three quarters of the growth is due to the increase of the average pension. In the prospective part, we simulate the contributions and pension benefits required to balance the budget, based on different rules: Defined Contribution, Defined Benefit and the Musgrave rule (keeping constant the ratio of pension benefit to wage net of contributions). We then simulate pension adjustment via the "individual retirement account" (IRA) as proposed in Devolder (2019) and Devolder & Hindriks 2019). Under the IRA, the adjustment variables are the accrual rate (which determines the new pension claims) and the indexation rate (which determines the past pension claims). Combining those adjustment variables, our simulations show that it is possible to protect past pension claims and ensure budget balance on a yearly basis. We propose a rule of adjustment so as to equate, year by year, the replacement rate across retirees of different ages.

Suggested Citation

  • Arno Baurin & Jean Hindriks, 2020. "Pension financing and individual retirement account," LIDAM Discussion Papers IRES 2020002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2020002

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Jean Hindriks & Pierre Devolder & Erik Schokkaert & Frank Vandenbroucke, 2017. "Réforme des pensions légales : le système de pension à points," Regards économiques 2017130, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Jean Hindriks & Arno Baurin, 2019. "Financement des pensions : rétrospectives et perspectives," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 97-119.
    3. Schokkaert, Erik & Devolder, Pierre & Hindriks, Jean & Vandenbroucke, Frank, 2020. "Towards an equitable and sustainable points system. A proposal for pension reform in Belgium," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(1), pages 49-79, January.
    4. Arno Baurin & Jean Hindriks, 2019. "Quels sont les métiers pénibles ?," Regards économiques 151, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. Pierre Devolder & Jean Hindriks, 2018. "La pension à points : 5 principes pour plus d’équité dans les régimes de pension en Belgique," Regards économiques 139, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antoine Bozio & Simon Rabaté & Audrey Rain & Maxime To, 2019. "Quelles règles de pilotage pour un système de retraite à rendement défini?," PSE-Ecole d'économie de Paris (Postprint) halshs-02514738, HAL.
    2. Andras Simonovits, 2020. "Indexing public pensions in progress to wages or prices," CERS-IE WORKING PAPERS 2015, Institute of Economics, Centre for Economic and Regional Studies.
    3. Pierre Devolder & Inmaculada Domínguez-Fabián, 2020. "Thinking in Vertical: A Practical Application of the Two-Stage Pension System in Spain," Sustainability, MDPI, Open Access Journal, vol. 12(23), pages 1-18, November.
    4. Arno Baurin, 2020. "The Limited Power of Socioeconomic Status to Predict Longevity: Implications for Pension Policy," LIDAM Discussion Papers IRES 2020019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. András Simonovits, 2020. "Indexing Public Pensions in Progress to Wages or Prices," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 12(2), pages 171-194, June.

    More about this item


    social security; pension; retirement; ageing;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctl:louvir:2020002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginie LEBLANC). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.