fornero1_Graeme RobertsonGetty Images_pension Graeme Robertson/Getty Images

The Right Recipe for Reforming Pensions

Even though governments do not provide all pension income in most national systems, they have good reasons to be involved in reform efforts. And one of the best things governments could do is to ensure that workers have the information and financial education they need to make the best decisions about their retirement.

TURIN – Pension reform is a thankless but necessary task. Pensions are a difficult and emotional subject that affects every citizen, and changing how they are calculated or when workers can retire involves negotiating a complex web of rules, habits, and entitlements that neat academic models do not capture.

In countries with national pension systems, the main pillar is typically written into law and managed by the state. Other sources of retirement income come from occupational pension funds and individual investments, which are dependent on the market but subject to regulatory bodies, such as the European Insurance and Occupational Pensions Authority.

Even though the state does not provide all pension income, governments have good reasons to be involved in reform efforts. After all, more than efficiency is at stake in the provision of pensions, and the insurance market’s ability to protect people in old age is limited. Moreover, relying on the market to provide senior citizens support risks causing an increase in poverty.