THE INVERTING PYRAMID: DEMOGRAPHIC CHALLENGES TO THE PENSION

SYSTEMS IN EUROPE AND CENTRAL ASIA

Anita M. Schwarz

Lead Economist

Human Development Department

Europe and Central Asia Region

World Bank

March 2014

1

IMPORTANT ACHIEVEMENT OF PROVIDING

OLD AGE SECURITY

Over last century, increasing number of workers

insured against risks of old age, disability, and

loss of a breadwinner

Insured workers and their employers pay a

percentage of wage as contribution

When each new group of workers joins,

contribution revenue goes up, but initially since

no one from the new group is eligible for benefits,

no additional expenditures occur

Over time as the workers who have paid become

eligible for benefits, expenditures increase 2

MATURATION OF PENSION SCHEMES

THROUGHOUT EUROPE

Established around 1900s > Industrial workers

Commerce, civil servants,

salaried employees

Since 1930s >

Farmers, domestic workers,

self-employed Since 1950s - >

Baby boomers Since 1970s - >

Increased female LFP rate Since 1960s (earlier in ECA)

Since 1990s in ECA - >

Since 2010s - >

Drop in total and formal LFP rate

Post-1990s babies enter LM

Maturity expected in 1960

Extended to 1990

Extended to 2010

Extended to 2020

Extended to 2030

No Extension,

Added stress 1990-2030

No Extension,

Added stress 2010-2050

3

POLICY CHOICES CHANGED

Pensions Designed to Supplement Other Income

• Provided at 70

• Limited to those who had lost working capacity

• Relatively small amount

Pensions Supply All of a Pensioner’s Income

• Ages lowered

• Benefits increased

• Benefits extended to survivors

Pensions Expected to Keep Up with Wage Growth of Working Age Population

• Wage indexation or more

4

1900 1950 1970

POLICY CHOICES WHEN FLUSH WITH

CONTRIBUTION REVENUES

56

58

60

62

64

66

68

70

72

1970 1975 1980 1985 1990 1995 2000 2005 2010

Male Average Effective

Retirement Age

Austria Belgium

Denmark France

Germany Italy

Netherlands Spain

Sweden United Kingdom

54

56

58

60

62

64

66

68

70

72

74

1970 1975 1980 1985 1990 1995 2000 2005 2010

Female Average Effective

Retirement Age

Austria Belgium

Denmark France

Germany Italy

Netherlands Spain

Sweden United Kingdom5

DURATION OF RETIREMENT INCREASED FROM

INCREASING LIFE EXPECTANCY AND FALLING

EFFECTIVE RETIREMENT AGE

0

5

10

15

20

25

30

Belgium Spain Sweden

Ex

pe

cte

d Y

ea

rs i

n R

eti

re

me

nt

1970

1990

2009

63

57

59

64 63

65

Average Effective Retirement Age Shown on Each Bar

71

67

63

Data Sources: OECD, Eurostat

6

ELDERLY ARE NOT IN GENERAL MORE POOR THAN

YOUNGER COHORTS

7

0%

20%

40%

60%

80%

100%

120%

140%L

ITH

UA

NIA

…

CR

OA

TIA

MO

LD

OV

A

BU

LG

AR

IA

BE

LA

RU

S

AL

BA

NIA

AR

ME

NIA

GE

OR

GIA

HU

NG

AR

Y

SL

OV

AK

RE

PU

BL

IC

PO

LA

ND

RO

MA

NIA

BO

SN

IA-H

ER

ZE

GO

VIN

A…

UK

RA

INE

MO

NT

EN

EG

RO

SE

RB

IA

AZ

ER

BA

IJA

N…

KA

ZA

KH

ST

AN

KO

SO

VO

KY

RG

YZ

RE

PU

BL

IC

TA

JIK

IST

AN

Ra

tio

of

co

nsu

mp

tio

n o

f h

ou

se

ho

lds w

ith

pe

nsio

ne

rs t

o

tho

se

wit

ho

ut

65+

80+

NOW EUROPE IS AGING

8

0%

5%

10%

15%

20%

25%

30%

35%

40%

Lu

xem

bou

rgF

ran

ceB

elg

ium

Cyp

rus

Malt

aS

loven

iaG

reece

Sw

itzerl

an

dS

pa

inIt

aly

Icela

nd

Irela

nd

Un

ited

Kin

gd

om

Norw

ay

Den

mark

Sw

ed

en

Fin

lan

dN

eth

erl

an

ds

Au

str

iaG

erm

an

yP

ort

uga

lA

rmen

iaR

ussi

an

Fed

era

tion

Rep

ubli

c of

Mold

ova

Bela

rus

Lit

hu

an

iaE

sto

nia

Alb

an

iaH

un

gary

Latv

iaG

eorg

iaS

lova

kia

Pola

nd

Czech

Rep

ubli

cC

roati

aR

om

an

iaB

ulg

ari

aM

on

ten

egro

Uk

rain

eS

erb

iaT

FY

R M

ace

don

iaB

osn

ia &

Herz

egovin

aT

aji

kis

tan

Kyrg

yzsta

nT

urk

men

ista

nK

aza

kh

sta

nU

zbek

ista

nA

zerb

aij

an

Tu

rkey

HIGS HIMS LSTC HSTC YC

Percentage of Population over the Age of 65

2010 2050

BUT MORE TROUBLING IS THE PROJECTED

DECLINE IN WORKING AGE POPULATION

9

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

Slo

ven

ia

Italy

Ma

lta

Sw

itzerl

an

d

Gre

ece

Sp

ain

Belg

ium

Fra

nce

Cyp

rus

Lu

xem

bou

rg

Port

uga

l

Germ

an

y

Au

stri

a

Neth

erl

an

ds

Fin

lan

d

Den

ma

rk

Sw

ed

en

Un

ited

Kin

gd

om

Norw

ay

Irela

nd

Icela

nd

Bu

lga

ria

Georg

ia

Rep

ubli

c of

Mold

ova

Bela

rus

Rom

an

ia

La

tvia

Ru

ssia

n F

ed

era

tion

Pola

nd

Lit

hu

an

ia

Cro

ati

a

Slo

vak

ia

Hu

nga

ry

Est

on

ia

Czech

Rep

ub

lic

Alb

an

ia

Arm

en

ia

Bosn

ia a

nd

Herz

egovin

a

Uk

rain

e

TF

YR

Mace

don

ia

Serb

ia

Mon

ten

egro

Azerb

aij

an

Tu

rkey

Ka

za

kh

sta

n

Uzb

ek

ista

n

Tu

rkm

en

ista

n

Kyrg

yzst

an

Ta

jik

ista

n

high income generous

spenders

high income moderate spenders lower spending transition countries high spending

transition

countries

young countries

1970-2010 2010-2050

LEADS TO FISCAL DEFICITS IN PENSION

SYSTEMS FAR GREATER THAN DURING

RECENT FINANCIAL CRISIS

-7%

-6%

-5%

-4%

-3%

-2%

-1%

%

2007 2017 2027 2037 2047 2057 2067

% o

f G

DP

Projected Pension System Deficits in Average CE Country

10

FACED WITH THE DEMOGRAPHIC ONSLAUGHT,

EUROPE HAS UNDERTAKEN LOTS OF

PARAMETRIC PENSION REFORM

11

0%

20%

40%

60%

80%

100%

120%

High Income

Generous

Spenders

High Income

Moderate

Spenders

Lower

Spending

Transition

Countries

High Spending

Transition

Countries

Young

countries

Increase in Retirement Age

Years of Service Reforms

Increase in Contribution Rate

Decrease in Contribution Rate

Indexation Reforms

Extension of Averaging Period

Changes to Benefit rate

ADOPTED A SMORGASBORD OF STRUCTURAL

REFORMS

Point System Notional

Accounts

Funded

Defined

Contribution

Universal

Pension

Germany

France (pvt sector)

Romania

Slovak Republic

Estonia

Bosnia, RS

Croatia

Montenegro

Serbia

Sweden

Italy

Latvia

Poland

Azerbaijan

Kyrgyz Rep

Russian Fed

Turkmenistan

Sweden

Denmark

Poland

Hungary

Slovak Rep

Lithuania

Latvia

Estonia

Bulgaria

Romania

Croatia

FYR Macedonia

Kazakhstan

Kosovo

Kyrgyz Rep

Russian Fed

Ireland

UK

Netherlands

Denmark

Czech Republic

Georgia

Kazakhstan

Kosovo

12

NO SINGLE DOMINANT PARADIGM HAS

EMERGED

Pension systems have two main objectives:

Poverty alleviation among the elderly

Replacing the income retirees used to earn so that

they don’t face a sharp drop in consumption ability

So far, pension systems in the region have more

or less done both – not so in other regions

Country interest in ECA has been toward income

replacement

Strengthening links between contributions and

benefits

Will this be affordable in the future? 13

IMPACT OF REFORMS - RETIREMENT AGES WENT UP,

BUT SO DID LIFE EXPECTANCY – DURATION OF

RETIREMENT DID NOT CHANGE MUCH

14

-4

-3

-2

-1

0

1

2

3

4

5

6S

wit

zerl

an

d

Ita

ly

Gre

ece

Cyp

rus

Fra

nce

Sp

ain

Malt

a

Slo

ven

ia

Belg

ium

Norw

ay

Den

mark

Fin

lan

d

Un

ited

Kin

gd

om

Irela

nd

Port

uga

l

Germ

an

y

Au

str

ia

Sw

ed

en

Neth

erl

an

ds

Icela

nd

Cro

ati

a

Latv

ia

Esto

nia

Hu

ngary

Slo

va

kia

Czech

Rep

ubli

c

Lit

hu

an

ia

Pola

nd

Bu

lgari

a

Rom

an

ia

High Income Generous Spenders High Income Moderate Spenders Lower Spending Transition Countries

ye

ars

change in effective retirement age change in life expectancy at effective retirement age

LIFE EXPECTANCY AT RETIREMENT

REMAINS WELL OVER 15 YEARS

15

10

15

20

25

Belg

ium

…G

reece

Sp

ain

Italy

Fra

nce

Lu

xem

bou

rgM

alt

aIr

ela

nd

…S

wed

en

Den

mark

Neth

erl

an

ds

Port

ugal

Un

ited

Kin

gd

om

Au

stri

aG

erm

an

yF

inla

nd

Norw

ay

Lit

hu

an

ia…

La

tvia

Alb

an

iaR

uss

iaB

ela

rus

Arm

en

iaB

ulg

ari

aH

un

ga

ryR

om

an

iaC

zech

Rep

ub

lic

Slo

vak

iaP

ola

nd

Cro

ati

aS

erb

ia…

Bosn

ia-F

ed

era

tion

Kazak

hst

an

…K

yrg

yz R

ep

ub

lic

Azerb

aij

an

Tu

rkey

ye

ars

male life expectancy at exit age

10

15

20

25

30

Gre

ece

…M

alt

aB

elg

ium

Sp

ain

Italy

Fra

nce

Lu

xem

bou

rgIr

ela

nd

…P

ort

ugal

Sw

ed

en

Neth

erl

an

ds

Den

mark

Norw

ay

Germ

an

yU

nit

ed

Kin

gd

om

Fin

lan

dA

ust

ria

Lit

hu

an

ia…

La

tvia

Bu

lgari

aA

rmen

iaR

om

an

iaH

un

ga

ryC

zech

Rep

ub

lic

Cro

ati

aS

lovak

iaR

uss

iaB

ela

rus

Alb

an

iaP

ola

nd

Serb

ia…

Bosn

ia-F

ed

era

tion

Kazak

hst

an

…K

yrg

yz R

ep

ub

lic

Azerb

aij

an

Tu

rkey

ye

ars

female life expectancy at exit age

PERSISTENCE OF EARLY RETIREMENT

16

0%

10%

20%

30%

40%

50%

60%

70%

80%

Lit

hu

an

ia

Latv

ia

Bu

lgari

a

Pola

nd

Cro

ati

a

Slo

va

kia

Rom

an

ia

Alb

an

ia

Georg

ia

Arm

en

ia

Bela

rus

Ru

ssi

a

Rep

ubli

ka S

rpsk

a

Serb

ia

Bosn

ia F

ed

era

tion

Kyrg

ysta

n

Kaza

kh

sta

n

Azerb

aij

an

Tu

rkey

LSTC HSTC YC

Share of Old Age Beneficiaries Below the Age of

65

male

female

total

NO EFFECTIVE DECLINE IN GENEROSITY

(2001-2008)

17

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Slo

ven

ia

Sw

itzerl

an

d

Ita

ly

Sp

ain

Gre

ece

Belg

ium

Fra

nce

Cyp

rus

Germ

an

y

Au

str

ia

Neth

erl

an

ds

Fin

lan

d

Un

ited

Kin

gd

om

Den

mark

Norw

ay

Sw

ed

en

Icela

nd

Port

uga

l

Irela

nd

Latv

ia

Cro

ati

a

Pola

nd

Bu

lgari

a

Lit

hu

an

ia

Slo

va

kia

Bela

rus

Czech

Rep

ubli

c

Esto

nia

Rom

an

ia

Hu

ngary

Ru

ssi

a

Arm

en

ia

Mold

ova

Mon

ten

egro

Mace

don

ia

Alb

an

ia

Serb

ia

Kaza

kh

sta

n

Tu

rkey

Kyrg

yzsta

n

Azerb

aij

an

Taji

kis

tan

HIGS HIMS LSTC HSTC YC

Gro

wth

in

Pe

nsio

n S

pe

nd

ing

pe

r E

lde

rly

Pe

rso

n R

ela

tiv

e

to G

ro

wth

in

Pe

r C

ap

ita

GD

P

Growth in Pension Spending Per Elderly Person

Compared to Growth of GDP per Capita

IN ALMOST EVERY COUNTRY PENSION

SPENDING IS PROJECTED TO GROW AS SHARE

OF GDP

18

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Ita

ly

Fra

nce

Gre

ece

Sp

ain

Malt

a

Belg

ium

Slo

ven

ia

Cyp

rus

Lu

xem

bou

rg

Den

mark

Port

uga

l

Sw

ed

en

Un

ited

Kin

gd

om

Au

str

ia

Germ

an

y

Fin

lan

d

Neth

erl

an

ds

Irela

nd

Norw

ay

Cro

ati

a

Latv

ia

Arm

en

ia

Pola

nd

Esto

nia

Ru

ssi

a

Alb

an

ia

Bu

lgari

a

Czech

Rep

ubli

c

Hu

ngary

Lit

hu

an

ia

Rom

an

ia

Slo

va

kia

Serb

ia

BH

Fed

era

tion

Bela

rus

Rep

ubli

ka S

rpsk

a

Kaza

kh

sta

n

Azerb

aij

an

Kyrg

yz

Tu

rkey

High Income Generous

Spenders

High Income Moderate

Spenders

Lower Spending Transition

Countries

High

Spending

Transition

Countries

Young

countries

2010

2060

AND COVERAGE OF THE ELDERLY IS

EXPECTED TO FALL – MORE SPENDING

NEEDED TO PREVENT OLD AGE POVERTY

19

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Arm

en

ia

Alb

an

ia

Rom

an

ia

Ru

ssi

a

Hu

ngary

Bu

lgari

a

Bela

rus

Latv

ia

Cro

ati

a

Lit

hu

an

ia

Czech

Rep

ubli

c

Esto

nia

Pola

nd

Slo

va

k R

ep

ubli

c

Georg

ia

Rep

ubli

ka S

rpsk

a

Bosn

ia F

ed

era

tion

Serb

ia

Azerb

aij

an

Kyrg

yz R

ep

ubli

c

Tu

rkey

Kaza

kh

sta

n

Taji

kis

tan

Koso

vo

LSTC HSTC YC

Share of Elderly Receiving Benefits in 2010 and

Projected to Receive Benefits in 2050

2010

2050

WHAT ARE POSSIBLE SOLUTIONS?

Increase labor force

Fertility increases – too little, too late

Increase labor force participation rates in prime ages

Increase coverage – increases fiscal problem in future

Increase productivity – typically reflected in wages,

which affect benefits

Immigration

Longer work life

Use other fiscal resources

Use savings to complement public benefits during

retirement

20

INCREASE LABOR FORCE PARTICIPATION – NOT

MUCH ROOM IN PRIME WORKING AGES

21

0

10

20

30

40

50

60

70

80

90

ECA circa 2009, men

0

10

20

30

40

50

60

70

80

90

ECA circa 2009, women

POTENTIAL FOR “ACTIVE AGING” IS HUGE IN

ECA REGION

22

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Sw

ed

en

Irela

nd

Un

ited

Kin

gd

om

Germ

an

y

Fin

lan

d

Den

mark

Port

uga

l

Neth

erl

an

ds

Au

str

ia

Sp

ain

Gre

ece

Fra

nce

Ita

ly

Belg

ium

Slo

ven

ia

Georg

ia

Esto

nia

Latv

ia

Lit

hu

an

ia

Mold

ova

Bu

lgari

a

Ru

ssi

a

Czech

Rep

ubli

c

Slo

va

kia

Rom

an

ia

Serb

ia

Cro

ati

a

Hu

ngary

Pola

nd

Uk

rain

e

Kaza

kh

sta

n

Kyrg

yzsta

n

Azerb

aij

an

Tu

rkey

HIMS HIGS LSTC HSTC YC

Potential labor force gain among the population age

45-64

60-64

55-59

50-54

45-49

ROOM FOR USING OTHER FISCAL

RESOURCES IS LIMITED

23

0

5

10

15

20

25

30

35

40

45

Slo

ven

ia

Arm

en

ia

Alb

an

ia

Ru

ssi

a

Georg

ia

Lit

hu

an

ia

Rom

an

ia

Esto

nia

Latv

ia

Slo

va

kia

Bu

lgari

a

Mold

ova

Pola

nd

Cro

ati

a

Czech

Rep

ubli

c

Bela

rus

Hu

ngary

Mace

don

ia

Uk

rain

e

Mon

ten

egro

Bosn

ia &

Herz

egovin

a

Serb

ia

Azerb

aij

an

Taji

kis

tan

Koso

vo

Kyrg

iz R

ep

ub

lic

Kaza

hk

stan

Tu

rkey

HIGS LSTC HSTC YC

Pe

rce

nt

of

GD

P

Taxes Already High social security contributions other taxes taxes on goods and services income taxes

Tax Structures,

SAVINGS COULD HELP SUPPLEMENT PUBLIC

BENEFITS, BUT LIMITED SAVING ACTUALLY

TAKING PLACE

24

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

% o

f G

DP

Voluntary and Mandatory Pension Savings in

2012

III Pillar (Voluntary) II Pillar (Mandatory)

25

TAKE A SIMPLER APPROACH TO PENSION

DESIGN AND EXPLAIN IT WELL

What can we afford to spend on pensions as a

percentage of GDP?

What do we spend now?

Do we see room realistically for increasing revenues?

What are our expected future needs to cover old

age and disability support?

How much is spending we have to do and how much

is spending we would like to do, but can painfully

reduce if absolutely necessary?

How do we reconcile the two?

26

WHAT DO WE SPEND NOW?

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Ita

ly

Fra

nce

Gre

ece

Sp

ain

Malt

a

Belg

ium

Slo

ven

ia

Cyp

rus

Lu

xem

bou

rg

Den

mark

Port

uga

l

Sw

ed

en

Un

ited

Kin

gd

om

Au

str

ia

Germ

an

y

Fin

lan

d

Neth

erl

an

ds

Irela

nd

Norw

ay

Cro

ati

a

Latv

ia

Arm

en

ia

Pola

nd

Esto

nia

Ru

ssi

a

Alb

an

ia

Bu

lgari

a

Czech

Rep

ubli

c

Hu

ngary

Lit

hu

an

ia

Rom

an

ia

Slo

va

kia

Serb

ia

BH

Fed

era

tion

Bela

rus

Rep

ubli

ka S

rpsk

a

Kaza

kh

sta

n

Azerb

aij

an

Kyrg

yz

Tu

rkey

High Income Generous

Spenders

High Income Moderate

Spenders

Lower Spending Transition

Countries

High

Spending

Transition

Countries

Young

countries

2010 – average pension spending 9.5% of GDP

27

BUT THIS SPENDING IS NOT NECESSARILY

WELL PRIORITIZED

Pensions provided and withdrawal from the labor force well below the age of 65

Impact both on pension spending and contribution revenues, but also on economic growth

Pension levels unsustainably high in some cases

Survivor benefits sometimes encourage women not to participate in the labor market

Affects contribution revenues and economic growth

Spending does not include spending on noncontributory benefits required to prevent all elderly from poverty

Fewer future elderly expected to be eligible to collect pensions

28

WHAT KIND OF PRIORITIES COULD

SOCIETIES SET?

1. No person over the retirement age (65) should fall below the poverty line (20% of GDP per capita)

2. Disabled individuals – those unable to provide for themselves - should be protected, regardless of age

3. Those who contribute to the pension system should receive a higher pension than the basic poverty alleviating one

4. Spouses and families of those who contributed should receive some additional supplement upon the death of the contributor to help support the family

29

AN EXAMPLE OF PRIORITIZING PENSION SPENDING AND

COSTING IT OUT IF EFFECTIVE RETIREMENT AGE IS 65 WITH

PRIME AGE LABOR FORCE PARTICIPATION UNTIL AGE 64

29

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Fra

nce

Slo

ven

ia

Gre

ece

Belg

ium

Cyp

rus

Ita

ly

Sp

ain

Malt

a

Port

uga

l

Irela

nd

Norw

ay

Un

ited

Kin

gd

om

Den

mark

Sw

ed

en

Fin

lan

d

Icela

nd

Germ

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y

Neth

erl

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ds

Au

str

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Alb

an

ia

Georg

ia

Ru

ssi

an

Fed

era

tion

Mold

ova

Arm

en

ia

Bela

rus

Lit

hu

an

ia

Bu

lgari

a

Hu

ngary

Esto

nia

Czech

Rep

ubli

c

Latv

ia

Slo

va

kia

Rom

an

ia

Pola

nd

Cro

ati

a

FB

IH

Rep

ubli

ka S

rpsk

a

Serb

ia

Taji

kis

tan

Kaza

kh

sta

n

Azerb

aij

an

Kyrg

yz R

ep

ubli

c

Koso

vo

Tu

rkey

HIGS HIMS LSTC HSTC YC

Pe

nsio

n s

pe

nd

ing

, p

ercen

t G

DP

basic to all old disabled top-up to covered survivor

30

SAME PRIORITIES AS BEFORE BUT WITH RETIREMENT AGE

WHERE LIFE EXPECTANCY EQUALS 15 YEARS AND PRIME AGE

LABOR FORCE PARTICIPATION UNTIL THEN

0%

2%

4%

6%

8%

10%

12%

14%

16%

Fra

nce

Slo

ven

ia

Cyp

rus

Gre

ece

Belg

ium

Sp

ain

Ita

ly

Malt

a

Port

uga

l

Irela

nd

Un

ited

Kin

gd

om

Norw

ay

Icela

nd

Sw

ed

en

Fin

lan

d

Den

mark

Germ

an

y

Neth

erl

an

ds

Au

str

ia

Alb

an

ia

Ru

ssi

an

Fed

era

tion

Slo

va

kia

Georg

ia

Arm

en

ia

Mold

ova

Czech

Rep

.

Esto

nia

Lit

hu

an

ia

Bela

rus

Latv

ia

Hu

ngary

Bu

lgari

a

Rom

an

ia

Pola

nd

Cro

ati

a

FB

IH

Rep

ubli

ka S

rpsk

a

Serb

ia

Taji

kis

tan

Koso

vo

Kaza

kh

sta

n

Azerb

aij

an

Kyrg

yz R

ep

ubli

c

Tu

rkey

HIGS HIMS LSTC HSTC YC

Pe

nsio

n s

pe

nd

ing

, p

ercen

t G

DP

Basic to all old disability Top-up to covered Survivor

31

HOW TO GET FROM HERE TO THERE

How do we equitably divide the change across

generations?

What do these decisions imply for pension system

design?

What do these decisions imply for the financing

of old age security?

Accompanying changes:

Changes in labor markets that encourage full labor

force participation until retirement and discourage

earlier withdrawal from labor force

Encouraging retirement savings to provide more

generous benefits than publicly provided

32

BOTTOM LINE: IT IS POSSIBLE TO PROVIDE OLD AGE SECURITY EVEN WITH CHALLENGING DEMOGRAPHICS!

Will need some major changes in expectations

Future may be more like past

Pensions given when people are too old to work

Pensions guarantee poverty prevention

May provide limited earnings replacement

Savings required for enhanced benefits