Challenges
Facingthe EuropeanPension Systems
Krzysztof Pater

1
European Economic and Social Committee

Dramatic DemographicChanges• low fertility rates• increases in life expectancy• retirement of the baby-boom generation2
European Economic and Social Committee

European Populationin 2008 and 2060

Source: Commission services

3
European Economic and Social Committee

Pension Reforms
are Challenging• citizens don’t accept or
fully understand changes• tendency to postpone
reforms, to leave problems
for the next government(s)and generations

4
European Economic and Social Committee

Need for Pension Reforms• more years in retirement• decreasing ratio ofpeople of working age topeople of retirement age• increase in pension
schemes duration

5
European Economic and Social Committee

Key Questions... divide increases in longevity
into work and leisure?

How to ...

... share the costs of longer lives
between and within generations?
... achieve balance between thenumber of working andretirement years?
6
European Economic and Social Committee

Objectives for
EU Pension Systems
adequate
retirement
incomesfinancialsustainability

reforms on

the basis ofconsensus

transparency

7
European Economic and Social Committee

Major Trends in Reforms• hybrid designs• self-balancing
mechanisms between
liabilities and revenues

8
European Economic and Social Committee

Most Popular Changes
in the Pension Systems• contribution period: change from „bestyears” to average life-time earnings• extended qualifying period for aminimum pension• equal pension age for women and men• increased pensionable age• strengthened bonus-malus system
9European Economic and Social Committee

Pre-funding as Policy Responseto the Demographic Challenge• new defined-contribution (DC)schemes• expansion of existing
occupational schemes• reserve funds• paying down of national debt
10
European Economic and Social Committee

Increasing Roleof Funded Schemes
Share ofoccupationaland statutory
fundedpensions in total
gross
replacement
rates in 2006
and 2046 inselected
Member States
11
European Economic and Social Committee

Valorisation and Indexation
Variablevalorisationindexation

Wages

√

√

Prices and wages√√

Prices√√Discretionary
Progressive√√12
European Economic and Social Committee

Labour Market
Participation Rates• male workers (aged 25 to 54 years) - ataround 90%• men aged 55 to 64 years – declined in thepast decades, now there are signs ofreversal• women - increased over the past 25 years• young people (aged 15 to 24 years) declined
13
European Economic and Social Committee

Changes in Theoretical
Replacement Rates

14
European Economic and Social Committee

Pension Reforms Impact
on Labour Market Performance
Estimated impact of pension reform onparticipation rates (2060), in percentage points(comparison of projections with and without
incorporating recent pension reforms)

25201510515-64

15-71

ITCZMTPLSKEU10ATDEHU

EU25EAEA12EU27EU15FISIESUKFRDKLTBEPT

EE

SE

055-6415
European Economic and Social Committee

Changes inPublic Pensions / GDP Ratio
LU
EL
CYRO
SIESMTBENOIELTNLSKFI
CZ
BG
EA16UK
EU27DEPT
FR
AT
DKSE
LV
HU
ITEE
PL-8-6-4-2

02

468

10121416

Social Security Pens ion /GDP16
European Economic and Social Committee

Impact of Career Breaks
on Pension Benefits
Accumulateddifference in net
theoreticalreplacement
rates for anaverage earnerentering thelabour market at
25 and retiring at
the statutoryretirement age
with a 1, 2 or 3
year career break
due tounemployment
compared with nobreak

17
European Economic and Social CommitteeConclusions
1) Pension reforms are stillneeded.
2) The crisis lesson must be
taken into account.
3) Pension systems must
be based on synergies
between various policies.

18
European Economic and Social Committee

Thank You for Your Attention

Krzysztof Pater
kpater@gazeta.pl

19
European Economic and Social Committee