Pension reform in Europe

Task 6 atomic number 18 incoming bountys secured? Bruno Miguel Silva Abrantes Current Issues in Economic Policy Academic course of study 2012-2013 Contents Are rewards secured? Understanding allowances Pensions show to handle the transition of a somebody as worker to retired. So that he enjoy an income leave behindd by the suppose or a nonher organization and maintain a similar standard of living to what he had while employed and thus pay a comfortable life frugalally, until the check of his life.The second objective of a subsidy is related to the fght against poverty which is done done a redistri plainlyion of income that romotes equity, within the elderly class. 1 at that place is a upraiseing business organization on the adjourn of the European cargon on the sustainability of pension systems in the heterogeneous countries of the European Union. The recent financial and economic crisis has revealed weaknesses that several countries go for and bring into do ubt the sustainability of the pension system. Economic growth slowed, unemployment has move and the public accounts atomic number 18 in pitiable condition.One of the more serious implications on future pensions is related to the fact that a liberal part of the population remains va weednistert or is forced to accept Jobs where they hold fast lower ncomes, or work slight time, which bequeath result in a lower pension. 2 Further combination the situation is a major demographic trend towards an aging population. The increase in life expectancy over the by decades, combined with low fertility judge is creating a change in the piece of the population. The number of active workers depart falloff while the number of concourse who ar retired will increase.Moreover, the numbers of years that a person remains employed is dwindling, part because people start to work later, collectable to the many years spent in education. On the other hand thither is a great tendency in obt aining early retirement ue to equaling policies and direction ot age in What ar the main systems of pension funding? the labor market. In several countries of the EIJ-27 the public sector is for the nearly part accountable for pensions, early retirement, harm and survivors. all the same there are some differences amidst the mingled divisions of the European Union at the level of pensions related to occupational or private pensions.In a generalized vogue pensions flush toilet be classified into triple pillars The public brotherly credential system, requisite or unpaid worker occupational organizations and freewill private schemes. The first, public affectionate security system is undoubtedly largely responsible for the allocation of pensions to the population in most member states of the EIJ-27. This pillar can be characterized mainly by the Pay-as-you-go system (PAYG). In this system pensions are financed directly from taxes and social roles that workers are p aying in the present.The taxes are used to pay pensions in the short-run instead of being used to render pecuniary resource that may grow in the long-term and gather future generations. 3 Schemes within the second pillar can be mandatory or voluntary occupational schemes. Participation in these coin is usually mandated by law and aims to impart an adequate pension to retired people tally to what they saved during their working life. These funds are created by a company or organization in order to provide proper pensions to their employees, which should correspond to the effort and contribution the workers exercised.Both the employee and the employer contribute to the fund, which grows with the return rates that start out with the state of the market and the economy. The amount of the pension depends on the number of years of supporter and closing salary of the employee. These funds are important to relieve the responsibility of the state to secure pensions in the whole pop ulation, but also because it is believed that these organizations are able to grow a fund more effectively than the state would. 4 The third and final pillar is characterized by private schemes. These are schemes that help people to accumulate nest egg for their retirement.The people who wish to do so can choose from a simple range of schemes who best match their needs. There are funds that are riskier nevertheless the contribution that person does is less than the benefit you will come up if all goes well. On the other hand there are safer funds in which the benefit will match the contribution made. Typically these funds are voluntary and are antonymous to government reforms that people receive from the state. 5 Looking at table 7(in appendix) we can divide public pensions, which are part of the first pillar of pensions in various sub-groups.Among which we can find Minimum pension / social allowance, Old age, early retirement, hindrance and survivors pensions. Early- retirem ent, old-age pensions, disability and survivors pension exist in almost all 27 member states. Early retirement does not exist in the Netherlands, Malta, United Kingdom and Norway. These schemes see mostly in the form of earnings-related, which pith that pensions are assigned according to what people make and contributed during their working life. However not all countries have adopted this scheme in the same way.In Denmark, survival and disability pensions are awarded according toa flat rate, oblation a pension with a immovable value over time. This way of organizing pensions can promote greater social equity it the people who are the target of these flat-rate pensions have not worked or contributed enough to receive a ension that is sufficient to have a good quality of life in old age. However the state has to support an extra effort to fund this pension scheme, an effort that ultimately fall on taxpayers, since the people who will receive these pension contributed less than the amount of pension they will receive. Minimum pension or social allowance schemes exist in all EIJ member-state. These pensions are usually means-tested, in the moxie that people are tested to determine whether they are , that is according to what the person has earned and contributed as an employee, or if they did not ork and had no and any gain if they have worked and which contributed authoritative is not enough to access a normal pension. This type of pension is normally financed by taxes on citizens rather than undivided contributions of individuals to pension funds. In the 2nd pillar we find Mandatory / voluntary schemes occupation.