DEMOGRAPHY,AGEING and PENSIONS

Aisling, Huong, Ting Ting, Thananya

AGEING and FERTILITY

RATE

AGEING What is ageing?

• „process of growing older and showing the effects of increasing age“

Current trends• People are spending more and more years in retirement

(increasing life-expectancy)• Lower birth rate

The ‘problem‘ of an ageing population• Ratio of non-workers to workers• In 2004, there were approximately 4 working age

individuals for every 1 retired person (4:1)• By 2056, the ratio is predicted to fall to 2:1

How Europe could age2000 2020 2050

Germany 22.9% 30%41%

Belgium 22.1% 30%38%

Denmark 19.9% 28%36%

Spain 21.8% 28% 44% France 20.7% 29%

38%

Persons 60 years and over as a % of the total population up to 2050

Source: Eurosat

How Europe could age

Possible Consequences of Ageing1) The incomes of retired people will have

to fall2) The proportion of workers‘ incomes to

pensioners will have to rise3) More income from private sources4) People will have to retire later5) Healthcare, pensions, housing,

community care on a greater scale than ever

6) Age discrimination

Fertility in EU Fertility rates in Europe

• Very low and further declining

Below the replacement – fertility rate, low fertility rate, very low fertility rate

Fertility postponement• Education• Labor market• Economic uncertainty

Fertility rates in EU

In Europe 2.1 children per woman is considered to be the population replacement level. These are national averages:

• Ireland: 1.88• France: 1.94• Sweden: 1.77• UK: 1.80• Netherlands: 1.73• Germany: 1.34• Italy: 1.34• Spain: 1.34• Greece: 1.28• Slovenia: 1.26 (the lowest)• Czech Rep.: 1.28

Source: Eurostat - 2004 figures

The shift to low and lowest fertility Period Total Fertility Rate in Western, Northern,

and Southern Europe (1950-2005): rising regional differences

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Perio

d To

tal F

ertil

ity (T

FR)

..... Europe

Northern EuropeSouthern Europe German-speakingWestern Europe

European Pensions

European Pensions

The European Council in Laeken December 2001

“to help Member States progressively develop their own policies so as to safeguard the adequacy of pensions whilst maintaining their financial sustainability and facing the challenges of changing social needs”

European Pensions The rapid ageing of the population has forced

governments to reform national pension arrangements and to reduce the value of state pension.

The working age people to pensioner halves over the next 50 years, state pension benefit will be cut by about 30%.

If tomorrow’s pensioners wish to enjoy the same level of retirement income in relative terms as today’s, they will need to work longer of save more.

German Pension

“Pay as you go”—link between contributions made and pension received

Compulsory Pension (contributory state pension)—96% of the population over 65 receives a pension from public purse

Occupational Pension (voluntary)---book reserves, retirement funds, direct insurance, support fund, pension funds.

Personal pensions and other retirement saving ( voluntary)

Italian Pension Notional Defined Contribution system Compulsory Pension– the state pension provides

cover 100% of the registered employed population with 70% of pervious earning ( full 35 year record of contribution)

Safety Net Pension—all people over 65 are eligible for a means-test pension.

Occupational Pension—funds are held by about 5% workforce

Personal Pension and other retirement saving– lower level of saving and pension product (8%),but direct equities and bonds(70%)

Czech Republic Pension 1995 Insurance Act

1) Obligatory participation for the economically active population

2) Pay as you go 3) State administration of the system4) The provision of old-age pensions, widow’s and

widower’s pensions as well as disability pension5) Contributions payable both by the employer and

employee 19.5% by the employer ,6.5% by the employee.

Czech Republic PensionOptimal supplementary pension scheme 1994 This scheme is administered by private pension funds

—joint-stock companies

The participant’s contribution amounts to roughly 2.5% of the average gross income

State provides every participant with a contribution a maximum of CZK 150 per month. i.e 1% of the average gross income

Czech Republic Pension

Another legal regulation from 1996 was in line with the principles of the EU

Retirement age by the end of 2006 ---61 years for men and 58-61 years for women

In 1998 Tax relief for supplementary pension scheme participants was stipulated by law

The average monthly old-age pension amounts to CZK 9111(in 2007)

SOLUTIONS

Common Goals: sustainability of pensions Younger work-force longer working life later retirement

Solutions-Pension By 2050 it will raise to 30% Different member states (MS)

different solution: • Netherlands: contractual pensions • Sweden: overarching reforms already in

place• UK: private pensions• Slovak: Individuals save their money in

private funds

Solutions-Pension safeguard the capacity of pension systems to meet their

social objectives. follow a multi-faceted strategy to place pension systems

on a sound financial footing, including a suitable combination of policies.

modernize of pension systems in response to changing needs of the economy, society and individuals

Solutions of Aging: “The Demographic Future of Europe:from challenge to opportunities”

European Commission paper 10/2006

Proposed 5 areas of action:1/ Promote demographic renewal: Women have

less children (1.5) than they actually want (2.3). The solution: daycares, more flexible working hours, extended parental leave, tax incentives, affordable housing, job security, a overall more flexible society and a modern family policy equal for man and women.

Solutions of Aging :“The Demographic Future of Europe:from challenge to opportunities”

2/ Promote employment: shrinking working age to get more women and older workers=>have to improve health care system and working conditions.

3/ More productive and competitive Europe: Invest in R & D, education and training=>new market opportunities, including for old people.

Solutions of Aging: “The Demographic Future of Europe:from challenge to opportunities”

4/ Receive and integrate immigrants: Young and dynamic workforce from outside solve the problem of future labor shortage. (troubles: different language, culture, crimes…)

5/ Suitable public finances: Pensions shall not be paid from loans which would only put the burden on future generations. It is better to fund for health care and pensions by spreading use of new financial instruments such as private savings and insurance.

THANK YOU FOR YOUR ATTENTION