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EU pension reform - An overview of the debate and an empirical assessment of the main policy reform options


  • K. Mc Morrow
  • W. Röger


This paper on European Union (EU) pension reform provides an overview of the debate and, on the basis of a series of model simulations, makes an empirical assessment of the main pension policy reform options at the EU, not the Member State, level. It estimates what it would take to bring the public PAYG pension system back into equilibrium and assesses the case for a shift to funding. The main conclusion of this paper is that the EU pension system should in the very long run (i.e. over more than one generation) be fully funded, with this being achieved using a two-stage optimal transition path. Stage one of this transition process should concentrate on stabilising the PAYG system and achieving a partial shift to funding, with stage two only occurring once circumstances permit. The fully funded system, once established, should have public and private pillars, with the public system in effect replacing the old PAYG system with a similar compulsory, defined benefit, system and with the private pillar being a voluntary, defined contribution, system.

Suggested Citation

  • K. Mc Morrow & W. Röger, 2002. "EU pension reform - An overview of the debate and an empirical assessment of the main policy reform options," European Economy - Economic Papers 2008 - 2015 162, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0162

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    References listed on IDEAS

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    7. Andrew B. Abel, 2001. "The Effects of Investing Social Security Funds in the Stock Market When Fixed Costs Prevent Some Households from Holding Stocks," American Economic Review, American Economic Association, vol. 91(1), pages 128-148, March.
    8. Thai-Thanh Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD Publishing.
    9. Heikki Oksanen, 2001. "A Case for Partial Funding of Pensions with an Application to the EU Candidate Countries," CESifo Working Paper Series 466, CESifo Group Munich.
    10. Axel Borsch-Supan & Reinhold Schnabel, 1999. "Social Security and Retirement in Germany," NBER Chapters,in: Social Security and Retirement around the World, pages 135-180 National Bureau of Economic Research, Inc.
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    13. Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
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    Cited by:

    1. Kieran Mc Morrow & Werner Röger, 2003. "Economic and financial market consequences of ageing populations," European Economy - Economic Papers 2008 - 2015 182, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Kim Massey Heide & Erling Holmøy & Ingeborg Foldøy Solli & Birger Strøm, 2006. "A welfare state funded by nature and OPEC. A guided tour on Norway's path from an exceptionally impressive to an exceptionally strained fiscal position," Discussion Papers 464, Statistics Norway, Research Department.
    3. Karl Pichelmann & Werner Roeger, 2004. "The EU Growth Strategy and the Impact of Aging," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 213-232, May.
    4. E Philip Davis, 2006. "How Will Ageing Affect the Structure of Financial Markets?," RBA Annual Conference Volume,in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.
    5. Dennis Fredriksen & Kim Massey Heide & Erling Holmøy & Ingeborg Foldøy Solli, 2005. "Macroeconomic effects of proposed pension reforms in Norway," Discussion Papers 417, Statistics Norway, Research Department.
    6. Erling Holmøy, 2007. "Fiscal sustainability: Must the problem be diminished before we can see it?," Discussion Papers 499, Statistics Norway, Research Department.
    7. Buiter, Willem H. & Grafe, Clemens, 2002. "Patching up the Pact: some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union," CEPR Discussion Papers 3496, C.E.P.R. Discussion Papers.
    8. Holmøy, Erling & Strøm, Birger, 2013. "Computable General Equilibrium Assessments of Fiscal Sustainability in Norway," Handbook of Computable General Equilibrium Modeling, Elsevier.


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