Demographic Change and the Sustainability of European Pension Systems

Abstract

European pension systems are increasingly challenged by profound demographic transformations, most notably population ageing and declining fertility rates. As Barr and Diamond underline, “pension systems are uniquely sensitive to demographic change because their liabilities extend far into the future” (Barr and Diamond, 2008, p. 3). These trends raise critical concerns regarding both the financial sustainability and the social adequacy of retirement systems, particularly those relying predominantly on pay-as-you-go financing. This essay addresses the following research question: to what extent do demographic changes threaten the sustainability of European pension systems, and how have European countries adapted their institutional arrangements in response?