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How should the EU finance its baby-boomers' pensions?

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How should the EU finance its baby-boomers' pensions?

Question from Sophie in Zurich, Switzerland:

“Hi, I’m Sophie from Switzerland. With baby-boomers entering the pension age, how will my generation pay for the retirement of our parents?”

Answer by John Woodall, Senior Social Security Specialist, International Labour Office:

“If we are going to find a good answer to the question, we have to ask the question in the right way. And I think that the key to this is to say that not all of the problems, by any means, arise from the phenomenon of the baby-boomers.

“It’s true that the unbalances are due to the growing number of elderly people who expect to receive pensions compared with those who are working and paying contributions, and therefore are keeping the system funded. But an even more important issue, I think, is that longevity is increasing. We have to find ways of dealing with that effectively.

“One possibility is to increase the money that is going into pension schemes, increasing the contribution rates, but of course this is not a popular solution right now, when everybody is under pressure.

“The second thing you can do is to think about reducing the amount of benefits that comes out of the pension schemes. You can see that solution having been applied in countries like Greece. Then you have to ask the question: is it fair that the pensioners should be those who bear a heavy part of the burden, which, arguably, should belong to society as a whole?

“The third thing you can do to re-balance the pension scheme is to increase the retirement age. Now, in most countries, this seems to be the best solution, not necessarily an ideal solution. But if this process is done gradually, over the years, this is perhaps the best way of dealing with the problem.”

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