286
Caprirolo
with pensions and other age-related expenditures (table 19.3). What is less obvious is the hidden financial effect on sustainability of pension systems associated with inadequacy and insufficient coverage of pensions. In these cases the contingent liability status for the state arising from low pension benefits or low system coverage does not disappear. Thus, pension reforms have to meet two criteria: provide adequate pensions in the long run (with replacement rates above the line of risk of poverty) and ensure fiscal sustainability. A comprehensive and fair assessment of the financial sustainability of a state-sponsored pension system (including private compulsory contributions) therefore has to
Table 19.3. Indicators of Sustainability and Adequacy of Pensions, Selected Countries
Country Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovak Republic Slovenia Spain Sweden United Kingdom
Change in statutory pension expenditures, 2004–50 –1.2 5.1 12.9 5.6 3.3 –0.1 3.1 2.0 1.7 — 9.9 6.4 0.4 1.5 3.7 7.4 –0.4 3.5 –4.6 9.7 4.1 8.3 7.1 0.6 2.0
Gross replacement rate (GRR), all pensions 2005
2050
Change in GRR (percent)
64 43 46 61 49 33 57 66 43 105 66 67 79 61 31 91 72 71 63 75 49 68.6 91 68 66
69 47 57 53 64 36 52 49 48 94 77 67 80 55 42 91 53 69 36 70 50 53 85 56 69
5 4 11 –8 15 3 –5 –17 5 –11 11 0 1 –6 11 0 –19 –2 –27 –5 1 –15.6 –6 –12 3
Source: European Commission 2006; Ministry of Finance, Slovenia.
Contribution rate used 22.8 50.5 16.6 28.0 13.6 22.0 21.6 20.0 23.5 20.0 26.5 30.0 39.6 20.0 26.0 24.0 30.0 21.0–22.0 36.9 34.8 24.0 24.3 28.3 30.9 34.6–38.4