CORDIS - EU research results

Adequacy of old-age income maintenance in the EU

Final Report Summary - AIM (Adequacy of Old-Age Income Maintenance in the EU)

Europe could face a pension crisis in the coming years which could leave many elderly people struggling in poverty. The continent's pension provision could be seriously undermined by demographic trends: Europe has a rapidly ageing population and low birth rates. That means a large number of elderly people to care for and less revenue to pay for pensions. What's more, in many European countries people are not saving enough for their retirement, and poorly performing funds are damaging confidence in the private pensions system. This leaves policy-makers with a huge challenge as they try to find ways to help Europe finance old age.

The AIM project aimed to develop new approaches and new methods for assessing the performance and adequacy of the pension systems with full respect of the sustainability constraint.

To this end, two main scientific objectives had been set for the project:

1. The work programme included an important research component addressing the methodology of analysis of the adequacy of pension schemes and pension reforms. This objective was pursued in two ways:
a. by undertaking model simulations in common and in a coordinated framework within a single work package; and
b. by undertaking a systematic examination of the simulation properties of simulation models including also models in application outside the consortium.

2. The project also applied the methodological tools in order to undertake research on the impact on the 'adequacy' of pensions of parametric reforms proposed in particular in the work of the Working Group on Population Ageing of the Economic Policy Committee and similar general plans for policies to ensure sustainability of pension systems. It should be stressed that the research did only indirectly address the issue of sustainability: in general the simulations undertaken assumed sustainability and analyse the consequences for the adequacy objectives. It was a main objective to undertake simulations on different classes of welfare systems (different social models) with the purpose of assessing the degree of convergence towards a European social model.

Adequacy was discussed, and possibilities of measuring it were outlined. This foundation stone then made the base for the statistical and econometric exercises guided by adequacy and its twin concept, sustainability:
adequacy - the concept and its operationalisation;
classification of pension systems in the EU;
- pension reforms and public opinion;
- building and applying comprehensive replacement rates;
- approaches to modelling aspects of pension reforms;
- pension reforms and the labour market;
- ensuring sustainability and actuarial fairness;
- poverty and social inclusion of the elderly;
- maintaining living standards;
- solidarity between and within generations.

The project had covered many aspects of retirement policies, from political economy to simulations of particular reform options. The bulk of the study covered statistical description of the material situation of the elderly in European Union (EU)-15 and the New Member States, simulations of various policy scenarios and discussions on incentives to retire or stay in the labour force.

The broad conclusion of the document was that pension incomes of future generations are under threat everywhere due to, mostly, demographic developments. At the same time, however, policy makers have a range of reform options at their disposal which, when implemented with careful regard for the political and social context, can ensure adequate incomes of the elderly in the future.