Economic and Social Research Institute (ESRI), and the Cabinet Office, Government of Japan location:Tokyo, Japan date:23 February 2012
Since about a decade, the pension policy of member states is a focal point of attention on the European level, as well as in other parts of the world. Traditionally, the focus was primarily on securing the fi-nancial sustainability. But a sensible assessment of financial sustainability cannot do without taking into account the social impact of ageing, budgetary and pension policy. Specifically should the devel-opment of pension adequacy be taken into account.
This presentation starts by giving an overview of applied dynamic microsimulation modelling as a re-search field, and recent developments therein. Next, it discusses how such integrated approach using shared demographic and macroeconomic assumptions has been developed in Belgium. It describes the dynamic microsimulation model MIDAS (an acronym for ‘Microsimulation for the Development of Adequacy and Sustainability’), highlighting how it aligns to the simulation results of the Belgian semi-aggregate model MALTESE.
Three example of a joint assessment of recent pension policy on both the sustainability and adequacy of pensions in Belgium are discussed: the recent increase of the means-tested minimum benefit for the elderly, a change of the long term growth rate of wages, and a change in the employment rate of the older active population.
The two models demonstrate that the important increase of the means-tested minimum pension benefit in 2006 has a limited impact on the costs of ageing (0.045% GDP), but a very important and immediate impact on the risk of poverty among the elderly. Furthermore, they show that a higher growth rate or a higher employment rate among the older active population have a comparable impact on the budgetary costs of ageing (from 5.3% GDP in the base-variant to 4.5 or 4.7% GDP), but that the impacts on the development of the risk of poverty among the elderly are far from comparable. Contrary to the high-employment rate variant, the high-growth rate variant results in a gradual increase in the risk of poverty among the elderly from 2020 on.
Finally, a recent development that may be relevant to the audience are presented and discussed. A new software tool, LIAM 2 is is a state of the art, freely available development environment, especially de-signed to allow teams of researchers to develop high-performance models on large micro-level datasets.
This paper was presented on request, not during a conference but during a closed meeting of the ESRI and representatives of the cabinet of the prime minister of Japan