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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.

Suggested Citation

  • Peeters, Marga, 2011. "“Better Safe than Sorry” - Individual Risk-free Pension Schemes in the European Union - Macroeconomic Benefits, the Mobile Working Citizen’s Perspective and Why Nots," MPRA Paper 33571, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33571
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    References listed on IDEAS

    as
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    2. Alain Jousten & Pierre Pestieau, 2002. "Labor Mobility, Redistribution, and Pension Reform in Europe," NBER Chapters,in: Social Security Pension Reform in Europe, pages 85-108 National Bureau of Economic Research, Inc.
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    4. 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, June.
    5. 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.
    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.
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    8. Holzmann, Robert & Palacios, Robert, 2001. "Individual accounts as social insurance : a World Bank perspective," Social Protection and Labor Policy and Technical Notes 23303, The World Bank.
    9. Zaidi, Asghar & Grech, Aaron George & Fuchs, Michael, 2006. "Pension policy in EU25 and its possible impact on elderly poverty," LSE Research Online Documents on Economics 6225, London School of Economics and Political Science, LSE Library.
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    More about this item

    Keywords

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

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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