Pension Policy in EU25 and its Possible Impact on Elderly Poverty

Asghar Zaidi, Aaron George Grech and Michael Fuchs

Published December 2006

This paper reviews changes in pension policies in EU countries between 1995 and 2005 and describes how they might affect risk of poverty for future pensioner populations. The pension landscape in Europe has changed considerably in the past decade and the paper highlights commonalities as well as differences in pension reforms across these countries. A common trend is that the retirement incomes drawn from the public pension systems are on the decline, the changes are likely to shift more risks towards individuals, and there are fewer possibilities of redistribution in favour of the lower income individuals. The paper includes exploratory projections of how the risk of elderly poverty might evolve in the future. The countries where the benefit ratio is set to decline significantly, as expected, would see at-risk-poverty rates increase quite substantially, especially during the period 2025-2050, when the bulk of the decline is expected. This analysis points towards the importance of a more comprehensive assessment of the reforms, in particular in their impact on vulnerable groups (such as women and disabled people with disruptive work history) and in the clarity of the signals they give to individuals in extending their working career if they want to avoid greater risks of poverty during retirement.