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DG ECFIN analyses public pension expenditure projections to gauge the size and timing of future changes in pension expenditure and the underlying driving factors. ECFIN also analyses the sensitivity of the projections to certain economic and demographic assumptions. Pension expenditure increases due to population ageing, and the assessment of pension reforms are areas of particular importance covered in these activities.

The age-related expenditure projections are produced through co-operation between national authorities and Commission services (DG ECFIN). The projections of public pension expenditures are made by the working group on Ageing Populations of the Economic Policy Committee (EPC), using national pension models. These projections are made on the basis of common population and labour force projections and common underlying economic assumptions endorsed by the EPC. The baseline projections are made on the basis of 'no policy change', i.e. only reflecting current legislation and excluding possible future policy changes (although account is taken of provisions in enacted legislation that will enter into force in forthcoming years).

The main areas of analysis are:

  • Projection on pension expenditure: national models are used to make the projections on pensions. These models take account of the key characteristics of each national pension system.
  • Breakdown of pension spending projections: the results of the projections are broken down to get a better understanding of the factors driving the increase in pension spending. These factors include: dependency effects, employment effects, eligibility effects and benefit effects.
  • Sensitivity tests: these are carried out in addition to the baseline scenario to quantify the responsiveness of projection results to changes in key assumptions – for example, lower than projected economic growth.

Latest available projections show that as a result of recent reforms the long-term trends in public pension spending in EU are expected to stay relatively stable by 2060. There are however large differences as to the future spending across Member States.

Read more in the Ageing Report 2015.

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