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wiiw Seminar Series
'Crisis Management in Central, East and Southeast Europe: What is
to be done?' |
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Asghar
Zaidi, Director Research, European Centre Vienna
Economic Crisis and its Impact on Pension Schemes and Benefits
10 May 2010, 5 p.m. |
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The presentation
will summarize the information available regarding the impact
of financial and economic crisis on different types of pension
schemes as well as on pension benefits of various population
subgroups. To this end, the following questions of relevance
to policy makers will be addressed:
- Does the current global economic crisis imply pension system
face fundamentally new challenges or does it merely highlight
existing problems?
- Does 'the crisis' provide an opportunity for re-evaluation
of pension strategies, especially those concerning a move towards
the private pension system, or should we stay on course towards
complementary private pension provision?
Clearly, the fiscal sustainability of public pension schemes
will be further exacerbated due to falling employment and the
pension contributions and the interruption of the pension accumulation
process. In many countries, the public pension expenditures
will be higher, as the demand for social support during old
age will increase. There is also a risk of higher expenditures
on disability benefits and early retirement pensions.
The occupational and private pension schemes have been affected
by the fall in the equity market, although the impact factor
on individuals and their pension benefits is variable, depending
on the 'retirement package' and on the share of equity in private
pension portfolios. There have been further pressures on define-benefit
type benefits and their funding and thus more closures of DB
schemes can be expected. Declining annuity rates and falling
pension pots will have long term implications for those currently
retiring or those retired persons who had not annuitized their
pension pot prior to the crisis. The crisis is triggering a
lack of trust in savings and savings institutions, so there
will be an unwillingness to contribute to voluntary supplementary
schemes.
The impact on pension substitutes is also noteworthy and often
overlooked in the discussion. Declining returns from personal
savings accounts and declining value of housing assets will
impact income and living standards of many older people. Whose
pensions are likely to be affected most? The degree of impact
will depend upon how close someone is to the retirement date,
the public-private mix of the pension system, to the extent
the private system is the defined-contribution type and also
whether the scheme, public or private, already has solvency
issues. The presentation will also summarize the policy responses,
either under the stimulus package or under special adjustments
to the pension schemes.
Asghar Zaidi is Director Research at the European Centre for
Social Welfare Policy and Research in Vienna. Until recently,
he has been a Senior Economist at the Social Policy Division,
OECD, Paris, where he worked on issues related to pension policy
and pensioner poverty in OECD countries. In the past, he worked
as Economic Adviser at the Department for Work and Pensions
of the United Kingdom, and as a researcher at the Social Policy
Department of the London School of Economics and University
of Oxford. His work interests include economics of ageing (particularly
pension reforms and their impact on retirement incomes), implications
of living costs of disability on poverty and resource measurement,
and dynamic microsimulation modelling. He has been the Vice-President
of the International Microsimulation Association since 2007.
He is currently a research affiliate at the German Economic
Research Institute (DIW Berlin), the Centre for the Analysis
of Social Exclusion (CASE), London School of Economics, and
the Centre for Research on Ageing, Southampton University. |
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