PensionReforms' summary and comments

This is the second of two reports issued together - this one looks at the possible impacts of recent "systematic" (and less substantial "parametric") pensions reforms on the future populations of the elderly.  The first confined itself to a review of poverty levels amongst the current elderly in the EU25.  PensionReforms reviewed that separately.  If we were worried about the relatively high risks of pensioner poverty today, stand by - things look as though they will get worse.

"Though the recent pension reforms are expected to have significant economic effects, most of the studies that have been carried out to date have mainly focused on their effect on fiscal sustainability. This, in part, confirms that reforms were broadly driven by financial sustainability motives and there appears to have been very little assessment of the potential impact of these reforms on pensioner poverty."

This confirms the assessment of the World Bank's Independent Evaluation Group (see the separate PensionReforms review) that there has been "insufficient attention on analysing the living conditions of the aged and exploring options for expanding the safety net for those outside of the formal pension system".

This report notes that "recently released assessment of ageing related public expenditures by the Economic Policy Committee and the European Commission suggests that the projected benefit ratio (the ratio of average public pension relative to output per worker) will decline by more than a tenth by 2025 and by more than a fifth by 2050.. In some cases the magnitude of the decline is quite worrying, cases in point being most of the new Member States but also Germany, Austria, France Italy and Sweden. The data shown in the Economic Policy Committee/EU Commission paper indicate that the decline in the benefit ratio will offset nearly a third of the fiscal impact of ageing."

PensionReforms thinks that EU25 countries need generally to ask why they are in the pensions business at all.  If it is to protect the vulnerable section of tomorrow's elderly populations, it looks as though they will generally fail that objective.  Already complicated systems can only become more complex as safety nets at the bottom expand to deal with increasing populations of the elderly poor (who all vote).  That will also make financial planning for the rest of the population more difficult as they struggle to understand what they should do about private retirement income provision.  PensionReforms thinks that more systematic reforms will be needed and are inevitable.

The link will give you both reports in one large (1.8 MB) file.  PensionReforms has reviewed both separately.

A separate 15 page version of the report on the impact of pension reforms is at: http://www.euro.centre.org/data/1157537586_83050.pdf

 

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