Back Matter
Author: Samuel Romero Martinez and Mauricio Soto
Publication Date:
10 Sep 2021
Language:
English
Keywords:
Pension and social policy; intergenerational fairness; sustainability; Europe
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Annex 1. Data Sources and Technical Assumptions

The following are the data sources, key definitions and technical assumptions:

  • Projection vintages follow the 2009, 2018, and 2021 versions of the Ageing Report (EC 2009, 2018a, 2021).

  • Population data—both historical and forecasts—is taken from the UN population database (medium variant).

  • Number of pensioners for 2007 – (2060) 2070 are taken from the respective Ageing Report vintages and extended backward until 2005 with growth rates of number of retirees from Eurostat.

  • Workers are defined as the part of the population aged 22 to the calculated effective retirement age. Everyone above the calculated retirement age is considered a pensioner.

  • An effective retirement age is calculated by distributing the number of pensioners for each year to the population of that year starting from age 100 until all pensioners have been accounted for. This retirement age is extended backwards with growth rates of statutory retirement ages from the OECD for 1950–2005 and kept constant for (2060) 2070–2100. The model’s sensitivity was tested to the labor market exit age as reported in the respective vintage of the Ageing Report, supplemented with the historic data taken from the OECD, yielding very similar results.1

  • Pension contributions for 2007 – (2060) 2070 follow the respective Ageing Report vintages while netting out any state transfers and third-party contributions as defined in the 2018 and 2021 Ageing Report vintages. These pension contributions are extended backward with growth rates of total social contributions from the OECD for 1965–2016. Where OECD data was not available, pension contributions are assumed constant as a share of GDP prior to 1970 and after (2060) 2070 until 2100.

  • Pension expenditures for 2007 – (2060) 2070 follow the respective Ageing Report vintages. These are extended backward with growth rates of actual pension spending data from Eurostat for 1990–2007 and from the OECD for 1980–90, and forward for (2060) 2070–2100 with growth rates of old-age dependency ratio.

  • Cohorts are defined by their birth year.

  • Distribution of pension contributions to different cohorts for a given year are assigned based on an interaction term between the size of the respective cohort in total workers and country-specific age-income profiles over the working life of a worker. The latter are derived from the Eurosystem Household Finance and Consumption Survey microdata (wave 3) and are kept constant before the age of 20 and after the age of 67 when smaller sample size can give rise to a selection bias. Cohort pension contributions and cohort pension expenditures are calculated by adding all contributions and expenditures over the lifetime of a cohort (22–100).

  • Distributions of pension expenditures to different cohorts for a given year are assigned based on the size of the respective cohort in the total number of pensioners that underlies reported baseline results. As a robustness test, pension expenditures were further distributed based on a notional age profile, constructed by dividing spending after retirement by a cohort-specific index of compounded real GDP growth rates. By distributing pension spending from older to younger retirees this adjustment allows for declining spending profile as retirees get older since pensions in payment in most countries are indexed with less than nominal wage growth. The resulting PM values show minimal changes for mature pension systems and for all European countries covered decline toward zero in the long term.2

  • Linear interpolation is applied to data between 5-year forecasts of the Ageing Report.

  • The proportionality measure for a given cohort is calculated by dividing lifetime cohort benefits received by lifetime cohort pension contributions paid.

Annex 2. Data and Calculated Proportionality Measures

Annex Table 2.1.

Pension Expenditures based on Ageing Report 2021

(Percent of GDP)

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Sources: Ageing Report vintages; Eurostat; and OECD.
Annex Table 2.2.

Pension Contributions based on Ageing Report 2021

(Percent of GDP)

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Sources: Ageing Report vintages; Eurostat; and OECD.
Annex Table 2.3.

Old-age Dependency Ratio based on Ageing Report 2021

(Percent)

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Source: United Nations.
Annex Table 2.4.

Calculated Retirement Age based on Ageing Report 2021

(Years)

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Source: IMF staff calculations.Note: See Annex 1 for definitions.
Annex Table 2.5.

Proportionality Measure based on Ageing Report 2021

(By cohort birth year)

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Source: IMF staff calculations.
Annex Table 2.6.

Proportionality Measure based on Ageing Report 2018

(By cohort birth year)

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Source: IMF staff calculations.
Annex Table 2.7.

Proportionality Measure based on Ageing Report 2009

(By cohort birth year)

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Source: IMF staff calculations.