Pension Reforms and the Political Economy of the Welfare State
Journal of European Integration, Vol. 32, No. 4, pp. 413-419
Posted: 25 Jul 2011
Date Written: July 2010
The last decennia, pension systems of many western countries have been under increasing pressure. Ageing populations have lead to situations of more liabilities than contributions, resulting in budgetary pressure in the short run and harming the financial sustainability in the long run. Prospects have even gotten worse due to the current global financial crisis. Depending on the type of pension plan, the impact of the current crisis differs across countries. In general, countries in which pension plans comprise more funded elements are, due to their dependence on investment performance, more affected than countries with more unfunded elements. Another relevant variable here is whether pensions are individually or collectively arranged. The more individual pension plans are, especially defined-contribution pensions schemes, the more individual retirees will be affected. Moreover, the financial crisis also generates different impacts within countries, along the lines of generations. This impact again varies with the type of pension plan, but retirees and people near to retirement are generally more affected than younger workers. Without doubt, these consequences of the crisis will call for pension reforms.
Keywords: pension reform, crisis, ageing
JEL Classification: H55, J26
Suggested Citation: Suggested Citation