PublicpensionreforminEurope.pptVIP

Public pension reform in Europe Richard Disney University of Nottingham Institute for Fiscal Studies Topics in the presentation The state of European public pension programmes Reform strategies Are there lessons for the UK? The basic facts Europe’s population is ageing Pension costs are rising Rising dependency ratios have been offset by increased participation of baby boomers (esp. of women) In many countries, greater generosity (benefit levels, early retirement) lies behind increasing pension costs In the future, old age dependency will become the key driver But projections of rising pension costs in future…. The good news: employment rates of older workers are rising Classifications of public pension programmes Single pillar v. multi-pillar (World Bank) ‘Beveridge’ v. ‘Bismarck’ Extent of public v. private provision Extent of ‘actuarial fairness’ in programme (esp. of public component) Reform strategies (not exclusive) ‘Parametric’ reforms (IMF jargon) e.g. less generous indexation, Italy 1992 Greater ‘actuarial fairness’ in public programme e.g. Italy 1995, Sweden, new German proposals ‘Top up’ funded component or prefunded public component e.g like US Trust Fund; various proposals from France, Ireland etc Greater selectivity (UK) Fixing up retirement incentives ‘Parametric reforms’ IMF (Chand Jaeger, 1996) Designed to restore fiscal stability Cutbacks in generosity Political credibility – how to stop backsliding? Likely to affect existing pensioners as well as future pensioners ‘Actuarial-based reforms’ Goes to back to ‘point systems’ used in France Germany Reconstitute pension claims as ‘notional accounts’ (Sweden, Italy) Contributions earn a sustainable ‘return’ (‘Aaron-Samuelson condition’) Indexation of key parameters (longevity, growth of accrued rights, indexation) to ‘sustainability’ indicators Pros of ‘actuarial reforms’ Gets rid of ad hoc nature of ‘parametric’ reforms Return on contributions transparent (willingness to pay /improve incentives?) G