IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Evaluating the possible impact of pension reforms on future living standards in Europe

  • Grech, Aaron George

Successive reforms enacted since the 1990s have dramatically changed Europe’s pensions landscape. This paper tries to assess the impact of recent reforms on the ability of systems to alleviate poverty and maintain living standards, using estimates of pension wealth for a number of hypothetical cases. By focusing on all prospective pension transfers rather than just those at the point of retirement, this approach can provide additional insights on the efficacy of pension systems in the light of increasing longevity. Our estimates indicate that while reforms have decreased generosity significantly, in most countries poverty alleviation remains strong. However, moves to link benefits to contributions have made some systems less progressive, raising adequacy concerns for certain groups. In particular, unless the labour market outcomes of women and of lower-income individuals change substantially over the coming decades, state pension transfers will prove inadequate, particularly in Eastern European countries. Similarly while the generosity of minimum pensions appears to have either been safeguarded by pension reforms, or improved in some cases, these transfers generally remain inadequate to maintain individuals above the 60% relative poverty threshold throughout retirement. Our simulations suggest that the gradual negative impact of price indexation on the relative adequacy of state pensions is becoming even more substantial in view of the lengthening of the time spent in receipt of retirement benefits. The consumption smoothing function of state pensions has declined noticeably, strengthening the need for longer careers and additional private saving. When pressed, policymakers, particularly in Western Europe, seem to have been more willing to sacrifice the income smoothing function of pensions rather than its poverty alleviation function. Policymakers in some counties, notably Germany, France and the UK, have sought to refocus state pension systems towards generating better outcomes for people in the bottom half of the income distribution, probably with the insight that middle- to high-income individuals are possibly in a better position to accommodate the effect of state pension reforms by increasing their private saving. However in some cases, notably in Eastern Europe, results suggest that policymakers may not have fully considered the full impact of their policies on those on low incomes, on those with incomplete careers and on women.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/39851/1/MPRA_paper_39851.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39851.

as
in new window

Length:
Date of creation: May 2012
Date of revision:
Handle: RePEc:pra:mprapa:39851
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Aaron George Grech, 2010. "Assessing the sustainability of pension reforms in Europe," CASE Papers case140, Centre for Analysis of Social Exclusion, LSE.
  2. Flood, Lennart & Klevmarken, Anders & Mitrut, Andreea, 2006. "The income of the Swedish baby boomers," Working Papers in Economics 209, University of Gothenburg, Department of Economics.
  3. Laurence Kotlikoff & Ben Marx & Pietro Rizza, 2006. "Americans' Dependency on Social Security," Working Papers wp126, University of Michigan, Michigan Retirement Research Center.
  4. Ondrej Schneider, 2009. "Reforming Pensions in Europe: Economic Fundamentals and Political Factors," CESifo Working Paper Series 2572, CESifo Group Munich.
  5. Disney, Richard, 2000. "Crises in Public Pension Programmes in OECD: What Are the Reform Options?," Economic Journal, Royal Economic Society, vol. 110(461), pages F1-23, February.
  6. Libor Dušek & Juraj Kopecsni, 2008. "Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 329-357, Oktober.
  7. Gábor Orbán & Dániel Palotai, 2005. "The sustainability of the Hungarian pension system: a reassessment," MNB Occasional Papers 2005/40, Magyar Nemzeti Bank (the central bank of Hungary).
  8. Raquel Fonseca & Theptida Sopraseuth, 2005. "Welfare Effects of Social Security Reforms across Europe: the Case of France and Italy," Documents de recherche 05-08, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  9. van de Coevering, Clement & Foster, Daniel & Haunit, Paula & Kennedy, Cathal & Meagher, Sarah & Van den Berg, Jennie, 2006. "Estimating economic and social welfare impacts of pension reform," MPRA Paper 1623, University Library of Munich, Germany.
  10. Asghar Zaidi & Aaron George Grech & Michael Fuchs, 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.
  11. Atkinson, Tony, et al, 2002. "Microsimulation of Social Policy in the European Union: Case Study of a European Minimum Pension," Economica, London School of Economics and Political Science, vol. 69(274), pages 229-43, May.
  12. John P. Martin & Edward R. Whitehouse, 2008. "Reforming Retirement-Income Systems: Lessons from the Recent Experiences of OECD Countries," OECD Social, Employment and Migration Working Papers 66, OECD Publishing.
  13. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2006. "Retirement expectations, pension reforms, and their impact on private wealth accumulation," Journal of Public Economics, Elsevier, vol. 90(12), pages 2187-2212, December.
  14. Grech, Aaron George, 2007. "Pension policy in EU25 and its impact on pension benefits," MPRA Paper 33669, University Library of Munich, Germany.
  15. Daniel Leigh & David Hauner & Michael Skaarup, 2007. "Ensuring Fiscal Sustainability in G-7 Countries," IMF Working Papers 07/187, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39851. 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: (Ekkehart Schlicht)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.