Financial sustainability of pension systems in the European Union

Abstract

Increases in life expectancy together with the decreases in fertility rates are predicted to make financing of public pension systems hard in an environment which some Eurozone member countries have had serious problems in their public finance, in the coming 50 years. European Union member countries, which have very different pension systems, have made pension reforms for sustainability of their pension systems such as increasing retirement age gradually, linking retirement age or benefits with changes in life expectancy, increasing the share of occupational and personal pensions in pension systems by taking into account the ageing and the negative effects of global financial crisis and the ongoing Eurozone sovereign debt crisis on public finance. This paper examines the pension systems in the European Union and evaluates the financial sustainability of pension systems in consideration of pension expenditures, ageing and the Eurozone sovereign debt crisis. Findings demonstrated that recent pension reforms by some European Union countries have mitigated the financial burden of pension systems, but further measures should be taken for the financial sustainability of pension systems.