Pensions at risk” “” “

As the enlargement of the European Union proceeds, it seems clear that the future member states will have to tackle the serious problems of funding their pensions systems, not very different from those that have emerged in the current member states. The cause of the problem is the same: the ageing of the population. In all countries the economic resources are no longer sufficient to fund the pensions of the growing number of elderly people. Some governments have decided to tackle this problem by replacing the public regime of pensions based on distribution by individual savings accounts managed according to commercial criteria (individual savings plans). From a recent study on the reform of the pension regimes in the candidate countries of the European Union, conducted by Elaine Fultz, an expert on questions of social security at the International Labour Organization (ILO) in Geneva, and presented in the last number of the journal “Travail”, it emerges, however, that these new pension systems based on capitalization suffer from the negative effects of the ageing of the population just as much as the old public regimes based on distribution. Reforming the pensions system. According to the research, the experiences conducted along these lines in various countries of Central Europe in the late 1990s have shown that the introduction of the system of compulsory individual savings plans encounters difficulties at the administrative level and risks penalizing the yield of the sums saved by workers. The investigation has also ascertained that this system “does not permit the problem of the funding of pensions, linked to the ageing of the population, to be solved in a lasting manner”. Particularly alarming is the situation in Hungary, Poland, Bulgaria, Latvia and Estonia, where governments are already proceeding to reduce the public component of the system, based on distribution, and concurrently introducing the individual savings plan system. In the Czech Republic, in Slovenia, Romania and Turkey, the governments, by contrast, have preferred to regulate the public pensions system, while at the same time developing optional complementary regimes. “The system based on distribution and the system based on capitalization – explains Fultz – are only two different ways of distributing the GDP of a given period between active workers and pensioners; in both systems it is the workers who have to finance the incomes of pensioners, by yielding to them a part of the wealth they have produced”. Moreover, “the transition to the system of individual savings plans managed according to commercial criteria could, in several decades’ time, generate a deficit in state budgets ranging between 0.5 and 2.5% of annual GDP”: the consequence of the cash deficit created in the coffers of the public pensions regimes by the transfer of a part of pension contributions to the new individual accounts. Such a solution, according to Fultz, “instead of resolving the problem, would end up by aggravating it in the long term”. Objectives and strategies. So how should states intervene? “Solutions need to be sought both within the labour market, and at the level of the pensions system”, suggests the author of the study. She recommends that governments should “render the labour market more flexible to create jobs, invest in training and in the new technologies to increase productivity, adopt policies favourable to the family and to immigrants to increase the active population and, lastly, reform the pensions systems with a view to encouraging the prolongation of workers in active employment”. These measures, according to Fultz, “ought to lead to a growth in national productivity” and help “increase the economic resources available for funding pensions”.