Pension systems and their reforms
Guide to the studies


Pension systems in advanced welfare states
•The backbone of social security systems: 8 – 15% of GDP and growing, contributions typically about
20% of salaries (employer + employee)
•Originated at the end of 19th century as one of the first welfare state arrangements: Bismarck and
and Bevergidge type
•Currently almost full coverage of population, differences in replacement rates pension/previous
wage (ILO convention from 1952 which requires 40%rr as a floor)
•The problem of ageing: challenge to the pension schemes
•Three pillar system (I PAYG public compulsory, II FUND publ/priv/empl//comp/vol, III FUND
private/voluntary)
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•Developing countries: incomplete coverage, only some categories of workforce, fragmented system,
low replacement rates, low contributions

J. Myles – philosophy of the pension system and objectives/aims in advanced systems
•PS objectives traditionally: security and adequacy of income in old age + sustainability of the
system
•Problem of ageing population – difficult to reconcile basic objectives
•PAYG system p/w = c x  W/P
•Fund system  (DC, DB) p = yrs x c x (cap-infl)/(Le - Pa)
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•The problem is not financing the system, but a distributional one: how will the costs of
population ageing socially distributed? This is the problem of fairness, justice in pension scheme…

Distributional dilemmas
•Intergenerational justice, intragenerational justice, gender equality
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•Intergenerational justice – possibilities:
•FRR
•FCR
•FRP (Musgrave condition)
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•Context of reforms (towards FUND)
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Intragenerational + gender justice
•Adequacy - includes both neediness and merit
•Context: increases of pension age (differentials in life expectancy and distributional impacts),
shift to FUND – low income groups are affected – implications:
•Strong (higher guarantee of) protection against poverty
•More redistribution on the income side, including funding from general taxation
•Gender (gender pension gap)
•Male logic of the system + inequalities in working life
•What to do about it?  Substitute periods/child credits, tax assignations, shared pensions - still
only partial impact

Consider about criteria/indications?
•What indications may reflect the general dilemmas/criteria, which and how?
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•Total/average replacement ratio?
•Individual replacement ratio? (by income level, gender)
•Impact of childcare breaks?
•Impact of unemployment breaks?
•Poverty rate among pensioners?
•Minimum pension levels?
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•See also Pensions at a Glance (OECD), Pension adequacy report (EU)
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