Adequacy of Pension Systems in Europe: An Analysis Based on Comprehensive Replacement Rates

Abstract

The aim of this paper is to develop indicators to highlight the ability of different national pension systems to enable individuals to maintain their living standards at retirement. Authors Margherita Borella and Elsa Fornero of the University of Turin and CeRP, perform the analysis using data and projections on different European countries and propose the use of a ‘COmprehensive Replacement’ (CORE) rate. Their aim is to compute, for a set of countries representative of the different European welfare and pension systems, both an actual (data-based) version of CORE, based on ECHP data, and to project its evolution into the future.

The paper is organised as follows. Section 1 provides a theoretical framework as well as a review of the literature on the topic. Section 2 contains the computation of replacement rates based on ECHP data. In Section 3 CeRPSAM projections are used to compute COREs over time. Section 4 concludes.

Keywords: adequacy, pension systems, Europe, comprehensive, replacement, rates, retirement, COmprehensive Replacement, CORE, pension, ageing