Better Safe than Sorry - Individual Risk-Free Pension Schemes in the European Union

MPRA Paper No. 33571

25 Pages Posted: 22 Sep 2011 Last revised: 21 Feb 2012

Date Written: September 20, 2011

Abstract

Variations between the diverse pension systems in the member states of the European Union hamper labour market mobility, across country borders but also within the countries of the European Union. From a macroeconomic perspective, and in the light of demographic pressure, this paper argues that allowing individual instead of collective pension building would greatly improve labour market flexibility and thus enhance the functioning of the monetary union. I argue that working citizens would benefit, for three reasons, from pension saving in a risk-free savings account. First, citizens would have a clear picture of the accumulation of their own pension savings throughout their working life. Second, they would pay hardly any extra costs and, third, once retired they would not be subject to the whims of government or other pension fund managers. This paper investigates the feasibility of individual pension building under various parameter settings by calculating the pension saved during a working life and the pension dis-saved after retirement. The findings show that there are no reasons why the European Union and individual member states should not allow individual risk-free pension savings accounts. This would have macroeconomic benefits and provide a solid pension provision that can enhance mobility, instead of engaging workers in different mandatory collective pension schemes that exist around in the European Union.

Keywords: pensions, labour market, monetary union, mobility

JEL Classification: G23, H55, H75, H83, J11, J26, J32, J61

Suggested Citation

Peeters, Marga, Better Safe than Sorry - Individual Risk-Free Pension Schemes in the European Union (September 20, 2011). MPRA Paper No. 33571, Available at SSRN: https://ssrn.com/abstract=1931111 or http://dx.doi.org/10.2139/ssrn.1931111

Marga Peeters (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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