Building a simplified model to assess the impact of population ageing, employment trends and immigration levels on pension sustainability in the EU-25 member states

Fernando Gil Alonso, Universitat Autònoma de Barcelona

Although the problem of pensions funding cannot be reduced solely to the demographic factor, the construction of highly sophisticated models to analyse the impact of ageing on pension sustainability introduces problems of data availability and comparability between EU Member States owing to the different types of pension systems existing in each country. To overcome these obstacles, the approach used in this paper is different. A model has been defined using some simplified assumptions, which do not provide precise forecasts but orders of magnitude on the implications of ageing for the 25 EU countries over the period 2000-2030. This is done by using a range of scenarios of population and employment trends in order to assess the impact of a series of alternative measures –like the increase of the effective average age of labour exit or the growth of labour supply through immigration– to assure the sustainability of pension systems. The results emphasise the importance of employment growth for Europe and in particular the need to keep older workers at work, thereby contributing to both increased participation and delaying retirement.