The 2021 Ageing Report: pension reform reversal and adequacy risks in the EU

The baseline projections in the 2021 Ageing Report incorporate current pension legislation across EU Member States. However, there has been a rising incidence of reform reversals in recent years, with governments undoing earlier pension measures, in particular increases in the retirement age. To account for the budgetary impact of such possible reversals, this article first looks at a policy scenario where effective retirement ages are frozen at their current levels. The cost of withdrawing planned increases in the legal retirement age is sizeable in most countries, underscoring the risks posed by future policy reversals for pension expenditure in some Member States. This section also shows that, at current legislation, the baseline projections point to a quasi-universal decline in pension benefits relative to wages. For this reason, a second policy scenario assumes that governments are compelled to raise pension benefits at some point, by changing parameters such as benefit indexation, the valorisation of contributions, or the level of minimum pensions. If such a scenario were to unfold, the estimates point to a considerable budgetary impact in the long term for the Member States concerned.