The socio-economic impact of pension systems

Back in 2011 the European Commission  took a look at pension issues called "The socio-economic impact of pension systems on the respective situations of women and men and the effects of recent  trends in pension reforms” it is interesting reading and can be downloaded here (PDF file). The main highlights are below. What is interesting is that the pace of progress on reform is moving at a very slow pace; it must be sped up to meet the needs identified.

The purpose of the study is to enhance our understanding of the socio-economic impact of  pension systems on the respective situation of women and men. The goal is to present a picture  of what takes place within the 27 Member States, the three EEA/EFTA countries and the three  candidate countries (Croatia, Former Yugoslav Republic of Macedonia and Turkey). The information considered in this report was provided mainly by the national experts of the EGGSI network of experts in gender equality, social inclusion, healthcare and long-term care supplemented by a wide-ranging review of the literature and comparative data available.

The study analyses contributory and assistance (non contributory) old-age pensions, focusing on the situation of women and men (both EU and non-EU nationals), and taking into account the challenges resulting from demographic change in terms of adequacy and gender equality, as well as the gender impact of recent pension reforms. Focusing on gender inequalities, the study places pension adequacy at the centre of discussion. 

Some findings:

• Gender differences in demographic and labour market trends affecting pension income 
• Increasing demographic pressures and socio-economic changes have forced since the 1990s  European countries to reform their pension systems in order to improve their sustainability in  the long run, with significant effects on their capacity to contain poverty risks in old age and reduce gender and inter-generational inequalities.

The main factors affecting pension systems can be summed up as follows: 

a. the demographic

challenge, as, on the one hand, the first cohorts of baby boomers have started retiring, while on 

the other hand Europe's working-age population is shrinking due to declining fertility rates. 

Moreover, as life expectancy increases, future generations will have progressively more years to live through in retirement on average; 

b. the changing structure of labour markets, with the 

increasing share of part-time and flexible employment and inadequate pension rights 

portability, often resulting in short and insufficient period of contributions, affecting women in 

particular; 

c. societal change with increasing differences in household patterns, such as single or 

cohabiting households, and growing divorce or family separation rates, posing further 

challenges to pension systems based on family or derived rights.

These factors entail heavy consequences on the sustainability of pension systems, on the one

hand, and on the adequacy of pension income on the other, affecting women in particular as the gender differences observed in life expectancy, in employment and in household patterns, imply that women are likely to have lower pension entitlements than men in old age and that different 

categories and generations of women are affected in different ways.

Poverty concerns older women more than older men

Income from pensions is the major source of income for women in old age, but the pensions 

women receive are lower than the men’s. The main causes for the pension gender gap, according to the literature, are that women earn less than men on average, work more often in part-time jobs and atypical contracts. More frequently than men, moreover, they tend to work in the informal labour market, have interrupted working careers and retire earlier. All these conditions have an impact on their lifetime earnings, influencing the duration and level of contributions to their pension records and the type of pension schemes they have access to. As a consequence, income levels for elderly women across Europe are significantly lower than for the rest of the population: despite the long-term improvement in contribution-based pensions and the existing old-age allowances, in most countries ageing women continue to experience higher poverty risks than their male counterparts, especially when over the age of 75. 

The increasing challenges posed by migration trends on pension system on pension systems

Another demographic aspect to be taken into consideration is migration trends, as labour 

migration is the main source of population growth in the European Union. The challenges it 

poses in host countries are increasing, as migrant men and women present lower employment 

rates, greater proportion in insecure jobs and the informal economy, exposing migrant workers 

to more serious risks of social exclusion and poverty than the resident population, and this is 

reflected in pension entitlements. 

The issue of social protection for migrant workers is particularly relevant both for men and for 

women, but for women the situation is even worse than that of men as undocumented but also 

legal migrant women are more exposed than men to working in the informal sector of the host 

country. The choice of many migrants to go back home after reaching pensionable age 

represents an additional challenge to the European countries pension systems, involving the 

issue of the pension portability rights – an issue which has not yet received adequate attention 

on the part of policymakers in European countries.