Adequacy of Public Pension Systems
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Pensions are the main source of income in old age. Their main value is provided, in most countries, by public pension systems. Therefore, one of the main challenges for governments and policymakers is to enable people to smooth consumption over the life cycle in an appropriate scale. This implies that pensions must be sufficient to prevent poverty and social exclusion, or even to provide enough income allowing to maintain the previous standard of living, and also to limit the gender gap between men and women. In recent years there has been a wave of reforms of public pension systems with the main objective to improve their financial sustainability both in the medium and long term. Many of the measures carried out within these reforms have negative effects on the adequacy of pension systems because they involve, in one way or another, e.g. a decrease in the replacement rate, a lower indexation. Therefore, reconciling the objectives of sustainability and adequacy is a priority challenge for pension policymakers in the coming years. Because of that, the aim of this chapter is to explore the concept of adequacy, different means of its measurement, the indicators used in cross-country studies on adequacy and how that measurement at different moments of time can help to take action in one way or another.
KeywordsPublic pension systems Pension policy Adequacy Sustainability Replacement rate Indexation Rate of coverage
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