9th Conference European Sociological Association

RN22 Sociology of Risk and Uncertainty

2009-09-05 13:30:00 2009-09-05 15:00:00 Saturday, 5 September 13:30 - 15:00 Social Policy Building I, 2E4

Sustainability and uncertainty of pension provisions in Europe

In recent years there has been a trend towards sustainable pension systems with policy makers and academics showing an increasing interest towards private institutions playing a role in complementing public provisions and individuals being offered incentives to save for retirement. The sustainability of pension systems has provoked discussions in many western countries about the reform of funded pension schemes, the age of retirement, and the adequacy of post-retirement income. Many European countries, faced with ageing populations and their socio-economic consequences have had to implement several pension reforms in the last decade. The argument in favour of fully funded pension systems (as opposed to PAYG), where retirees receive pensions linked to their contributions over their lifetime, is one of long term sustainability, however amongst the countries that have implemented private defined contributions schemes some have also experienced high poverty rates of those in retirement, especially among the most vulnerable individuals with interrupted employment histories or on low incomes. This paper examines the microeconomic evidence on provisions and adequacy of pension income of ageing populations across Europe by using data from the Survey of Health, Ageing and Retirement in Europe (SHARE) and the Family Resources Survey (FRS). This article presents the key changes introduced to pension systems by European governments in the last decade, illustrates how recent reforms aim at increasing the sustainability of state pension systems by introducing and encouraging private schemes but also reflects on the increased uncertainty brought about by the same reforms. The authors suggest that unless a complementary relationship between public and private pension exists, where private components are added to the basic level of state pensions and do not substitute them, the adequacy of retirement income will be negatively affected. Further, we argue that the effects of interrupted employment histories and low paid jobs lead to more serious consequences, in terms of post-retirement income adequacy, in systems based on private defined contributions, where the risk of stock market falls and low annuity rates are placed with the individuals.