Changes to pension systems

Changes to pension systems

One of the important issues of population ageing is the future of pension systems and their long-term financial sustainability. In most countries, pensions currently represent a high percentage of retirees’ income. Numerous reforms are underway to adapt existing systems to changing demographic trends (longer life expectancy, retirement of the large baby-boomer cohorts, changing family and marital structures) and economic trends (increase in unemployment, diversification of labour-force pathways, employment of seniors).

Two types of studies are pursued at INED in this area. The first deals with gender equality, a still recent aspect in the field of pensions. The aim is to study the disparities in economic status between men and women, currently and in the future, and the way in which the pension system can compensate for this through special provisions that take family into account. The second research focus is the concept of generosity, which is frequently used in the field of pensions but little discussed, and constructing an indicator to measure it.

Pension system provisions and families

Although it is not their main purpose, the pension systems in most countries factor in marriage and/or children. The French pension system, in particular, incorporates family concerns, by providing for the surviving spouse after the death of the other spouse (survivor’s pension) and by granting entitlements depending on the number of children (family entitlements). Those provisions currently account for almost 20% of total spending on pensions in France. They make a substantial contribution to reducing pension disparities between men and women, which are nevertheless likely to remain large in the future, despite women’s increased participation in the labour force. The scale of these provisions and likely and planned changes to them in many countries prompt three questions:- What is the rationale behind the provision for family status by pension systems and how are they implemented in an environment that has changed radically since they were first introduced?- What compensations do these provisions make?
- What knowledge do individuals have of these provisions? And do they support them?

Special attention is paid to the survivor’s pension, a provision for widowhood that awards a percentage of the deceased spouse’s pension to the surviving spouse. Research has highlighted the important role of the survivor’s pension, which avoids a brutal decline in the standard of living of widowed people after the death of their spouse.

How can the generosity of pension systems be measured?

The concept of generosity is encountered frequently in the literature on pension systems. It is central to comparisons between systems in the same countries or between countries. The concept is also frequently referred to when reforms are implemented to restrict the supposed generosity of a pension system or a particular scheme. However, this common term has many possible meanings. Research has identified two aspects of the generosity of a pension system, internal and external, and the relevant indicators (the retirement age, the size of the pensions paid, the existence and level of the minimum pension for internal generosity, and coverage of the system and income of elderly people for external generosity). Work is under way to construct a composite indicator, modelled on the multi-dimensional Human Development Indicator (HDI). That will make it possible to take account of all the aspects of the pension system and to compare different countries or systems. The indicator will then be used for a comparative study of Algeria, France, Morocco, Tunisia and Turkey, five Mediterranean countries all frequently described as generous.

Some references

Bonnet C., Hourriez JM., 2012, « Egalité entre hommes et femmes à la retraite : quels rôles pour les droits familiaux et conjugaux ? », Population-F, 65 (2)

Bonnet C., Hourriez JM., 2012, « La prise en compte du couple par le système de retraite : réversion et partage des droits », Population-F, 65 (2)

Bonnet C., Hourriez JM., 2012, « Inégalités entre hommes et femmes au moment de la retraite en France », 2012, in Regards sur la Parité, Insee

Benallah S., Bonnet C., El Moudden C., Math A., 2012, « Comment mesurer la "générosité" des systèmes de retraite ? Une application aux pays de la Méditerranée », Région et développement, n° 35

Bonnet C., Destré G., 2011, « Connaissance et opinion sur la prise en compte de la situation familiale par le système de retraite », Retraite et Société, n° 60

Bonnet C., Hourriez JM., 2008, « Quelle variation du niveau de vie suite au décès du conjoint ? », Retraite et Société, n° 56, pp. 106-137