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Pension reforms in the EU since the early 2000's: achievements and challenges ahead

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  • Carone, Giuseppe
  • Eckefeldt, Per
  • Giamboni, Luigi
  • Laine, Veli
  • Pamies, Stephanie

Abstract

Most EU Member States have carried out substantial pension reforms over the last decades in order to enhance fiscal sustainability, while maintaining adequate pension income. The intensity of pension reforms has been particularly strong since 2000. These reforms have been implemented through a wide range of measures that have substantially modified the pension system rules and parameters. One of the most important elements of pension reforms, aside of whether countries engaged or not in a systemic change, has been the introduction of mechanisms aimed at automatically adjusting (indexing) the key pension parameters (pension age, benefits, financing resources) to demographic pressure (e.g. changes in life expectancy, increase in the dependency ratio). Indeed, since the mid-1990's, half of the EU Member States have adopted either automatic balancing mechanisms, sustainability factors and / or automatic links between retirement age and life expectancy. All these pension reforms are projected to have a substantial impact on containing future pension expenditure trends. According to the latest long-term projections in the 2015 Ageing Report, public pension expenditure is projected to be close to 11% of GDP over the long run in the EU, almost the same as in 2013. However, the fiscal impact of ageing is still projected to be substantial in many EU countries, becoming apparent already over the course of the next two decades. This is also due to the very gradual phasing in of already legislated reforms, an issue that raises questions about the intergenerational fairness of the reforms and poses some doubt on the time-consistency of their implementation. Indeed, the sustainability-enhancing pension reforms legislated in a majority of EU countries will lead to a reduction of generosity of public pension schemes for future generations of retirees. But to make sure that these reforms will not have to face political and social resistance and risk of reversal in the moment they start to be implemented in full, other "flanking" policy measures are likely to be necessary: for example, reforms that boost retirement incomes by effectively extending working lives and employability of older workers (also through flexible working arrangements that allow people to keep working beyond current formal retirement age and to step down gradually from full-time to part-time to very part-time work) and provide other means of retirement incomes (e.g. private pensions) and appropriate social-safety nets to avoid that low-wage people follow back in poverty at old age.

Suggested Citation

  • Carone, Giuseppe & Eckefeldt, Per & Giamboni, Luigi & Laine, Veli & Pamies, Stephanie, 2016. "Pension reforms in the EU since the early 2000's: achievements and challenges ahead," MPRA Paper 78163, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:78163
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    References listed on IDEAS

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    Cited by:

    1. Heer, Burkhard & Polito, Vito & Wickens, Michael R., 2020. "Population aging, social security and fiscal limits," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    2. Clémentine Garrouste & Elsa Perdrix, 2022. "Is there a consensus on the health consequences of retirement? A literature review," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 841-879, September.
    3. Mattia Guidi & Igor Guardiancich, 2018. "Intergovernmental or supranational integration? A quantitative analysis of pension recommendations in the European Semester," European Union Politics, , vol. 19(4), pages 684-706, December.
    4. Díaz-Saavedra, Julián, 2020. "The fiscal and welfare consequences of the price indexation of Spanish pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(2), pages 163-184, April.
    5. Mazzotta, Fernanda & Bettio, Francesca & Zigante, Valentina, 2018. "And Thou Shalt Honor: children’s caregiving, work and religion," GLO Discussion Paper Series 202, Global Labor Organization (GLO).
    6. Evsey T. Gurvich, 2019. "Long-Term Global Trends in Pension Policy," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 9-26, December.
    7. María del Carmen Ramos-Herrera & Simón Sosvilla-Rivero, 2020. "Fiscal Sustainability in Aging Societies: Evidence from Euro Area Countries," Sustainability, MDPI, vol. 12(24), pages 1-20, December.
    8. Daniel Baksa & Zsuzsa Munkacsi & Carolin Nerlich, 2020. "A Framework for Assessing the Costs of Pension Reform Reversals," IMF Working Papers 2020/132, International Monetary Fund.
    9. Harpa S. Eyjólfsdóttir & Neda Agahi & Johan Fritzell & Carin Lennartsson, 2022. "Physical functioning as a predictor of retirement: Has its importance changed over a thirty-year period in Sweden?," European Journal of Ageing, Springer, vol. 19(4), pages 1417-1428, December.
    10. Nerlich, Carolin, 2020. "How costly are pension reform reversals?," Research Bulletin, European Central Bank.
    11. Francisco Perez-Arce & Maria Prados & Erik Meijer & Jinkook Lee, 2018. "Social Security Coverage around the World: The Case of China and Mexico," Working Papers wp395, University of Michigan, Michigan Retirement Research Center.
    12. Sheila Rose Darmaraj & Suresh Narayanan, 2019. "The Long-Term Financial Sustainability of the Civil Service Pension Scheme in Malaysia," Asian Economic Papers, MIT Press, vol. 18(1), pages 155-178, Winter/Sp.
    13. Jorge Miguel Bravo & Mercedes Ayuso & Robert Holzmann & Edward Palmer, 2021. "Intergenerational Actuarial Fairness when Longevity Increases: Amending the Retirement Age," CESifo Working Paper Series 9408, CESifo.
    14. Lanotte, Myriam & Devolder, Pierre, 2022. "Communication relative aux pensions : digitalisation et défis pour l'avenir," LIDAM Discussion Papers ISBA 2022015, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    15. Mira Krpan & Ana Pavkovic & Berislav Zmuk, 2020. "Cluster analysis of new EU member states' pension systems," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 18(2B), pages 208-222.
    16. Giuseppe Croce & Andrea Ricci & Giuliana Tesauro, 2019. "Pensions reforms, workforce ageing and firm-provided welfare," Applied Economics, Taylor & Francis Journals, vol. 51(32), pages 3480-3497, July.
    17. Edyta Marcinkiewicz, 2019. "Voluntary Pensions Development and the Adequacy of the Mandatory Pension System: Is There a Trade-Off?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(2), pages 609-636, June.
    18. Malgorzata Gumola-Kardas, 2021. "Change in a Pension System: A Manageable and Measurable Process?," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 421-433.
    19. Nerlich, Carolin, 2020. "How costly are pension reform reversals?," Research Bulletin, European Central Bank, vol. 68.
    20. Draženović Bojana Olgić & Hodžić Sabina & Maradin Dario, 2019. "The Efficiency of Mandatory Pension Funds: Case of Croatia," South East European Journal of Economics and Business, Sciendo, vol. 14(2), pages 82-94, December.
    21. Gordana Matković & Katarina Stanić, 2020. "The Serbian Pension System In Transition: A Silent Break With Bismarck," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(225), pages 105-134, April – J.
    22. Enrique Devesa & Mar Devesa & Inmaculada Dominguez-Fabián & Borja Encinas & Robert Meneu, 2020. "The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain?," Risks, MDPI, vol. 8(4), pages 1-21, December.
    23. Audrius Kabašinskas & Kristina Šutienė & Miloš Kopa & Kęstutis Lukšys & Kazimieras Bagdonas, 2020. "Dominance-Based Decision Rules for Pension Fund Selection under Different Distributional Assumptions," Mathematics, MDPI, vol. 8(5), pages 1-26, May.
    24. Marta Rodriguez-Vives, 2019. "The quality of public finances: where do we stand?," Economics and Business Letters, Oviedo University Press, vol. 8(2), pages 97-105.

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    More about this item

    Keywords

    Pensions; ageing population; public expenditure; debt; deficit; potential growth; structural reforms; retirement age; older workers; longevity risk.;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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