In the past few decades, a myriad of reforms in Europe have had a significant impact on the way and extent to which public pensions provide retirement income. This departmental paper takes stock of where European pension systems stand and assesses their key characteristics. We present a novel measure of the balance between lifetime benefits and contributions—the Proportionality Measure—to examine pension systems’ long-term sustainability, fairness, and intergenerational equity
The Greek pension system has been costly, complex, and distortive, which has contributed to Greece’s fiscal problems and discouraged labor force participation. Several attempts to reform the system faltered due to lack of implementation, pushback by vested interests, and court rulings leading to reversals. A series of reforms introduced throughout 2015–17 unified benefit and contribution rules, removed several distortions and reduced fragmentation and costs. If fully implemented throughout the long-term, these reforms can go a long way towards enhancing the pension system affordability. However, reforms faced setbacks and fell short of creating stronger incentives to build long contribution histories, to deliver sustainable growth by improving the fiscal policy mix, and to ensure fairness and equitable burden sharing across generations and interest groups. Policy priorities should aim towards fully implementing the 2015–17 reforms and complementing them with additional reforms to address these remaining objectives.
Introduction : the political economy of pension reform / by Camila Arza and Martin Kohli -- The "new politics" of pension reforms in Continental Europe / by David Natali and Martin Rhodes -- Between conflict and consensus : The reform of Bismarckian pension regimes / by Martin Schludi -- How do politicians get away with path-breaking pension reforms? : the political psychology of pension reform in democracies / by Einar Overbye -- The politics and outcomes of three-pillar pension reforms in Central and Eastern Europe / by Katharina Muller -- Changing European welfare : A new distribution pattern of pension policy? / by Camila Arza -- The interdependence of the system of solidarity and the system of equivalence / by Martin Rein and Karen Anderson -- The Anglo-American pension regime : failures of the divided welfare state / by Robin Blackburn -- The gender pension gap : effects of norms and reform policies / by Patricia Frericks and Robert Maier -- Generational equity : concepts and attitudes / by Martin Kohli.
Since the early 1990s the transition economy countries of Eastern Europe and Central Asia have had to adapt their pension systems in minor and often very major ways. Some of the changes relate to shrinking contribution bases and the inability of government's to finance prior commitments, while still having to protect the pensioned populations from poverty. Other changes, however, reflect the need to make pension systems more sustainable in light of forthcoming demographic changes. The reforms entail a move away from a single-pillar pay-as-you-go defined benefit systems toward multi-pillar systems that include a funded defined contribution component, and change that convert remaining pay-as-you-go components into ones that are more self sustaining and transparent. The paper describes ongoing developments, assesses the effects of current and forthcoming challenges in light of potential labor market changes, and examines choices for a new pensions system with respect to the organization, administration, guarantees, transition arrangements, participation requirements, role of the government, annuitization, and other factors. The paper concludes that though a 'one-size-fits-all' approach is clearly not appropriate, some practices emerging from the experiences in this region and elsewhere may offer useful guidance to others as they undertake deeper pension reforms.
Social Security in the United States and in Europe is at a critical juncture. Through the essays assembled in Social Security Pension Reform in Europe, Martin Feldstein and Horst Siebert, along with a number of distinguished contributors, discuss the challenges facing Social Security reform in the aging societies of Europe. A remarkable range of European nations—Germany, France, Finland, the Netherlands, Poland, Romania, Italy, Sweden, the United Kingdom, and Hungary—have implemented or are about to implement mixed Social Security systems that combine a traditional defined benefit of the pay-as-you-go system with an individual retirement account defined contribution of a capital-funded system. The essays here highlight the problems that the European pension reform process faces and how it differs from that of the United States. This timely volume will significantly enrich the debate on pension reform worldwide.
This is an admirable example of a multi-authored comparative book. The two editors set the scene very carefully in the opening chapter and the subsequent chapters follow the framework set out and use the concepts explored there. In this never simple policy area, national systems are explained as clearly as possible by each author. Michael Hill, Journal of Social Policy This is an enlightening introduction to the global dimensions and complexity of pension reform. Recommended. J.F. O Connell, Choice Population ageing and the resulting pressures on existing pension systems constitutes one of the most important challenges modern societies will have to face over the coming decades. Although governments have responded to such pressures by adopting a plethora of pension reforms, the adaptation process is far from over. This book comprehensively documents developments in pension policy in eleven advanced industrial countries in Western Europe, East Asia and North America. In order to explore what population ageing means for the sustainability of pension systems, the authors present a detailed review of pension policy making over the past two decades and provide up-to-date analysis of current pension legislation. They examine the factors that can facilitate or impede the adaptation of pension systems and the features that shape and determine reforms. They also highlight the fact that although the path of reform taken by each country is somewhat different, the processes at work are often very similar. Ageing populations throughout the world are extremely reluctant to see their pension systems dismantled and are therefore prepared to mobilise in their defence. This process of mobilisation interacts with demographic pressures and institutional constraints to help determine the future direction of pension policy. The breadth of geographic coverage provides an almost global picture of the impact of ageing on pension reform, at least in terms of high income countries. Academics and students with an interest in economics, social policy, sociology and political science will find this a worthwhile and rewarding volume. It will also be of value to policymakers interested in how the problem of unsustainable pension systems can be resolved.
Throughout the developed world, public and private pension schemes face major challenges that are creating irresistible pressures for reform. Major structural changes in Latin America and in Central and Eastern Europe have led to particularly fierce pressure. Two member states of the European Union - Italy and Sweden - have introduced radical reform of their public pensions systems; controversial pension reforms have been proposed in France and Germany; and the British government has been widely criticized over its pension reforms and its 2002 white paper. This exceptional volume examines the challenges faced by pension schemes in the advanced economies and the reforms that have been introduced to tackle these challenges. A team of international contributors provides an up-to-date, invaluable analysis of different aspects of pension problems, prospects and reforms. The book incorporates cross-national chapters as well as a focus on individual countries including Belgium, Brazil, Colombia, Finland, Greece, Italy, Sweden, the UK and the USA.
Demographic realities will soon force developed countries to find ways to pay for longer retirements for more people. In Pension Strategies in Europe and the United States, leading economists analyze topical issues in pension policy, with a focus on raising the retirement age, increasing retirement savings, and the political sustainability of reforms that will accomplish these goals. After a substantive and wide-ranging introduction by the editors that weaves together the demographic and economic strands of the story, the chapters present cutting-edge research, offering both theoretical and empirical analyses. Contributors examine such topics as the reform of key structural features of existing pay-as-you-go (PAYG) pension systems, analyzing how benefits should vary with the age of retirement, labor supply elasticity after France's 1993 pension reform, and fiscal response to a demographic shock; the feasibility of PAYG reforms in the United States and the competition among state pension systems that results from labor mobility in Europe; and private, funded systems (increasingly perceived as necessary adjuncts to PAYG systems) in the UK, the US, and the Netherlands, and in terms of individual portfolio management. The editors conclude the volume with a study of recent German and UK reforms and their effects on personal savings.ContributorsTheodore C. Bergstrom, A. Lans Bovenberg, Antoine Bozio, Woojen Chung, Juan C. Conesa, Gabrielle Demange, Richard Disney, Carl Emmerson, Robert Fenge, Luisa Fuster, Carlos Garriga, Christian Gollier, John L. Hartman, Ayse Imrohoroglu, Selahattin Imrohoroglu, Thijs Knaap, Georges de Ménil, Pierre Pestieau, Eytan Sheshinski, Matthew WakefieldRobert Fenge is Senior Research Fellow at the Ifo Institute for Economic Research and Assistant Professor of Economics at the University of Munich. Georges de Ménil is Professor of Economics at École des Hautes Études en Sciences Sociales (EHESS), Paris. Pierre Pestieau is Professor of Economics at the University of Liège. Fenge and Pestieau are coauthors of Social Security and Early Retirement (MIT Press, 2005).
The need for pension reform is an increasingly important issue on the economic reform agenda of most European countries, although there has been considerable variation in the approaches adopted. This publication contains a selection of papers from leading scholars and practitioners in the fields of economics and political science, which seek to provide an insight into the process and progress of European pension reform and to highlight areas for further research.
On the first anniversary of the death of Nobel Laureate Professor Franco Modigliani, the Luxembourg Institute for European and International Studies (LIEIS) organised a conference on 'Reforming European Pension Systems' on 24 and 25 September 2004 in Schengen. Initially, the intention was to hold this conference in the presence of Professor Modigliani who had written a comprehensive paper for the LIEIS. However, due to ill health, such a meeting had to be postponed repeatedly. A third date was set two days before Professor Modigliani's death. One year on, the LIEIS convened colleagues and friends to honour his memory and life-long work and to discuss his ideas in relation to pension reforms in Europe. In the course of 5 sessions, approximately 30 participants from about 10 countries debated the following questions: (1) the open legacy of Franco Modigliani and European pension reforms (2) the Modigliani-Muralidhar approach to pension reform (3) various funding modes and issues of transition (4) lessons and outlook on pension reforms in Europe (5) alternatives for pension reform in Luxembour Our research paper, which will appear in abridged form in the forthcoming Conference volume, published by Rozenberg publishers, Amsterdam, compares the cross national effects of pension reform on 33 indicators of social, economic, political and ecological well-being of nations with the effects on these 33 variables by dependency, the adherence to the advice by international financial institutions, world political or world cultural identities; the aging process; feminism, militarism; the public education effort and the development level. Traditionally, world system approaches explain human and economic misery by the dependent insertion of the periphery and the semi-periphery into the global economy. It is true that the ascending countries of East Asia, whose investment is often much higher than their savings rate, are at the winning side in the global social equation. It is also true that unequal exchange (ERDI) is still an important phenomenon, significantly explaining many processes of development. However, the privatization of public education, especially at the Third level, the developmental negative consequences of female distribution coalitions as well as the imperative of pension reform have been up to now neglected in cross-national development research. Interestingly enough, economic freedom as such is also not as relevant as pension reform in explaining economic or social success in the world system. We can say that foreign savings and pension reforms are among the most highly influential positive determinants of development today, while culturalist theories and dependency theories fail to achieve the levels of significance we had originally expected when compared to the new cross-national variable pension reform. These findings have important repercussions for the European debate on pension reform and the Lisbon strategy to catch up with the US by 2010 to make Europe the most competitive region in the world economy. European Union membership years by themselves are lamentably enough a rather negative determinant of the processes of development due to the cumbersome mechanisms and distribution coalitions that European institutions present, and the reliance of many countries in the European Union on publicly financed systems of education also has to be reconsidered. Political feminism is another master variable of the European political discourse and it is the main loser in the 1990s and the early years of the 21st Century, indicating again that political distribution coalitions are likely to lose today and tomorrow. The results reported clearly indicate that world systems studies would be well advised to take the processes of pension reform very seriously. To neglect pension funds in investigations about the capitalist world economy would be misleading at any rate. Private pension funds already amount to 44% of current world GDP, with countries like the United States; Japan; United Kingdom; Netherlands; Canada; Switzerland; Australia; Sweden; Ireland; Finland; and Denmark taking the lead in fund development either via the introduction of a World Bank three pillar models or simply via a strong element of private pensions (the third pillar) besides the first, traditional PAYGO pillar (like presently in the United States of America). Slow pension fund development in most countries of the Euro-zone determines that the overall share of private pension funds from the Euro-zone is just over 2% of world GDP. If Europe wants to fulfill its Lisbon agenda of catching up with the United States, it must overhaul its pension systems and introduce some form or other of private pension funds, which are a major force in financing technological advance in the capitalist world economy today. Our investigations also clearly show that World Bank pension reforms are associated in a positive way with the rates of change of a country's performance to the better.
