eight - Pension systems and the challenge of population ageing: what does the public think?

Summary

Introduction

Over the coming decades, population ageing is set to affect all European countries, probably resulting in a doubling of the ratio of pensioners to the working population within the next 50 years. At the same time, many European countries have until very recently experienced a significant decline in the employment participation of their older workforce, indicating a general trend towards ‘early retirement’. The combined effect of both trends sets serious pressures on contemporary pension systems, since relatively fewer people will be paying taxes and social contributions just as the share of people receiving pensions rises.

European policy makers, scientists and other opinion leaders are currently discussing a variety of solutions to these common challenges. However, no political solution can be expected to succeed without considerable public support. Here we analyse most recent Eurobarometer data from 2001 and 2004 to explore the opinions of people in 15 countries of the European Union (EU-15) on alternative reforms mooted for the twofold problem of population ageing and early retirement. Additionally, we need to know how public support for reform proposals is determined. What are the - partly institutionalised - values and norms shaping Europeans’ attitudes to pension policies? We shall start by examining suggestions outlined in the literature, then, using the most recent European survey data, test to see which accounts seem justified.

Population ageing and the ‘double crisis’ of pension systems

Demographic ageing

Nearly every European country is faced with the prospect of a population growing older, and eventually smaller. This development is due to both a decrease in fertility since the 1960s and a significant fall in mortality. In 2001, women in the EU-15 had, on average, 1.47 children (compared to 2.61 in 1960), whereas the average needed to replace the current population is 2.1 (European Commission, 2004a; Fahey and Spéder, 2004). While fertility rates seem to have reached their lowest point in 1999, due to better socioeconomic and environmental conditions and improved medical treatment, life expectancy is still increasing in Europe (over the last 50 years by about 10 years in total).

As a consequence, the ratio of those of retirement age (65+) to the workingage population (15-64) – the so-called old-age dependency ratio – will probably double within the next 50 years.