Munich Personal RePEc Archive

Pension reform sustainability in the EU: a pension wealth-based framework

Grech, Aaron George (2013): Pension reform sustainability in the EU: a pension wealth-based framework.

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Abstract

Most assessments of pension sustainability focus on the projected fall in spending. However interest in the impact on adequacy, usually measured by replacement rates, is increasing. In this paper we show that replacement rates have significant defects, related to being point-in-time indicators and the use of unrepresentative assumptions. We argue for the use of pension wealth calculated using more realistic assumptions. Looking at ten EU countries, we find that while generosity decreased significantly, systems’ effectiveness in alleviating poverty remain strong in countries where minimum pensions were improved. However, moves to link benefits to contributions have raised concerns for women and for those on low incomes. Though reforms have reduced the fiscal challenge of ageing, in many countries pressures will persist and further reforms are likely.

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