Getting A Grip on Europe

1
Getting A Grip on Europes Pension Problems
20th EFFAS Congress

• Pat McArdle
• Ulster Bank

Brussels 29 September 1998
2
Will you still need me, will you still feed me,
When Im sixty four

• The Beatles

3
Existing Pension Schemes are Generous

• 90 PAYG
• Indexed to prices/wages
• Spending ? 15 GDP
• 75 of previous income
• 75 of 60-64 age group retired

4
Europe is Uncompetitive Already
5
Post-War Baby Boomers
6
Elderly Dependency Ratio
2030
1990
7
Pension Costs
8
NPVs of Public Pension Liabilities
9
Budget Deficits
10
Debt Ratios
11
Wage Cost Implications
12
Changing Social Security is like political
suicide

• US Senator Daniel Patrick Moynihan

13
NPVs post-Reforms
14
Pension Fund Assets
15
Asset Allocation
16
Excess Equity Returns
17
EFRP Proposal
Assumptions

• By 2030 private pensions cover 60 of workforce
  and provide 25 of total pension payments

Results
1997 2020 GDP 33 71 ECU bln 1 10
18
Key Requirements

• Later retirement
• Curtailed benefits
• Funded private pensions
• Full pensions portability
• Abolition of all restrictive rules
• Single tax on benefits only
• Action NOW!

19
If I knew that I was going to live this long I
would have looked after myself better

• George Burns (aged 99½)