Redistributive impact of reforming the old-age pension system in Belgium

Marjan Maes

No 2008/19, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management

Abstract: The effects of three reforms of the Belgian old-age pension system were examined on retirement behaviour, government budget and income distribution of the retired. The first reform adjusts benefits with 5% for each year of retirement deviating from age 65 in the window 60-70. The second reform adjusts benefits with a lump sum amount of money for each year of retirement deviating from 65. In order to draw comparisons, the lumpsum amount is chosen such that, under the hypothesis of no labour supply adjustments, it has the same budgetary impact as the first reform. The third reform results of the recent implementation of the “pension bonus” in the Belgian old-age pension system. The belgian government wants people to work longer but does not penalize early retirement for reasons of political economy. Pension benefits are increased by 300 euro on a yearly basis for each year of retirement after age 60 in the window 60-65. The bonus applies, as the other two reforms, only to the bismarckian part of pension benefits, not to the means-tested assistance. The first and second reform increase retirement age with 0.9-1.8years and enhance financial sustainability of the system, contrary to the third reform that increases retirement age with 0.3-0.4 years. The first reform is not only the one that increases the size of the cake most but is also the one that divides the cake in most equal slices. Finally, it was shown that the impact of reforming the old-age pension system may be limited for individuals that have the prospect of receiving occupational pension wealth.

JEL-codes: C35 H23 J26 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2008-05
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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