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Pensions after the Crisis: A comparative analysis of recent reform processes

Pensions after the Crisis: A comparative analysis of recent reform processes. David Natali natali@ose.be Observatoire social européen. Pensions after the crisis. S1. Key questions S2. European pension models main challenges S3. Assessing the impact of the crisis

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Pensions after the Crisis: A comparative analysis of recent reform processes

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  1. Pensions after the Crisis: A comparative analysis of recent reform processes David Natali natali@ose.be Observatoire social européen

  2. Pensions after the crisis S1. Key questions S2. European pension models main challenges S3. Assessing the impact of the crisis public and private pensions S4. Most RecentReforms S5. Conclusion, ‘food for thoughts’

  3. S1. Key questions What impact of the crisis ? Is there a common trend in reforming pensions after the crisis? «Race to the bottom»? What challenges/strategies for the future?

  4. S2. European Pension Models (before the crisis)

  5. S2. European pension models

  6. S2. European pension models Source, Ebbinghaus 2010

  7. S1. European Pension Models, main challenges and reform trends (before the crisis) Population Ageing Cost-containment (indexation; retirement age; actuarial principle) Adequacy/Labour Market Transformations Modernisation (contribution credits; minimum benefits; minimum contributions) Viability/Economic and Employment Growth Cost-containment Modernisation (shift from contributions to taxes; role of pension funds)

  8. 2. Taking stock of 20 years of reforms, effective cutbacks Gross replacement rates 2007/60 (EPC, 2009)

  9. S3. Assessing the Impact of the Crisis • Financial crisis (pension funds) • Economic crisis (first pillar schemes, stabilisers) • Budgetary crisis (first pillar schemes)

  10. Pension funds’ nominal investment rate return in selected OECD countries (OECD 2010) S3. Funded Schemes

  11. S3. Reserve Funds, First pillarPension funds’ nominal investment rate return in selected OECD countries (OECD 2010)

  12. S3. Assessing the impact of the crisis, b) first pillar, automatic stabiliser Expected increase in social expenditures between 2007 and 2010 (EPC, 2009)

  13. Employment is expected to decline: nearly 8 million job losses for 2009/10, in contrast to the net job creation of 9½ million during 2006-08 • Potential growth rate of the euro area and that of Denmark, Sweden and the UK are expected to be cut in half in 2009-2010 compared with 2008, i.e. from a growth rate range of 1.3%-1.6% to 0.7%-0.8% S3. Assessing the impact of the crisis, b) first pillar, economic/employment effects (EPC, 2009)

  14. S3. Assessing the impact of the crisis, c) first pillar, budgetary effects Sustainability gap, % GDP (S2= IBP+LTC) (EPC, 2009 and Zaidi, 2010)

  15. S4. Most Recent Reforms

  16. S4. Multi-pillar systems, 1st gen.

  17. S4. Multi-pillar systems, 2nd gen.

  18. S4. Social Insurance systems,1st gen.

  19. S4. Social Insurance systems,2nd gen.

  20. Common traits of reforms • short-term increase of benefits and/or reduction of taxes • active ageing (increased retirement age, incentives for employers) • more effective regulation of supplementary schemes (reducing charges and increase protection) • Any convergence? • Race to the bottom? More complex reform packages • A ‘U-turn’ in some CEE countries S5. Conclusion

  21. S5. Conclusion, food for thoughts

  22. Annex. What distributional effects? Trends of net replacement rates through reforms (Zaidi, 2010)

  23. Annex. What distributional effects? Trends of net replacement rates through reforms (Zaidi, 2010)

  24. Annex. What distributional effects? Trends of net replacement rates through reforms (Zaidi, 2010)

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