Sustainability and adequacy in EU public and private pension schemes

Highlights:

• Sustainability and Adequacy are the two main (conflicting) key objectives of multi-pillar pension systems: while population ageing, and macroeconomic shocks affect Sustainability in the Defined Benefit (DB) space, they reduce pension adequacy in the Defined Contribution (DC) schemes.
• The fast switching from DB to DC plans by public and private sectors is making the adequacy issue ever more relevant.
• To preserve adequacy, without affecting sustainability, EU-Governments should introduce incentives to defer individuals’ retirement choices, enhance funded pension pillars, and increase flexibility e.g. through partial retirement.
• The insurance sector should blur out the distinction between saving and retirement/protection goals by mixing pension products with health and long-term medical care coverage, introducing guarantees of minimum return conditional to policyholders forgoing their capital early-redemption rights and accepting flexibility in the pay-out phase. 
• Citizens need to contribute more and for longer but the increase of non-standard work among the youngest does not help.