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The Sustainability and Adequacy of Pensions in Belgium Joint assessments with MIDAS and MALTESE . Gijs Dekkers. 2nd Tecnical meeting on the Use of Administrative Data and Modelling Techniques in the Monitoring of Pension Systems EC and the Spanish Presidency, Madrid, 23 March 2010 . - PowerPoint PPT Presentation
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The Sustainability and Adequacy of Pensions in Belgium
Joint assessments with MIDAS and MALTESE
Gijs Dekkers
2nd Tecnical meeting on the Use of Administrative Data and Modelling Techniques in the Monitoring of Pension Systems
EC and the Spanish Presidency, Madrid, 23 March 2010.
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Overview of this presentation
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I. General Introduction to MALTESE and MIDASII. The financial consequences of social policy:
two examples consideredI. An increase of the minimum right per career year
with 17% from October 2006 on
II. An increase of the Garanteed Income for the
Elderly (inkomensgarantie voor ouderen)
with 13,7% from December 2006 on
III. Work in PROGRESS and conclusions
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I. General Introduction to MALTESE and MIDAS
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MIDAS and MALTESE: institutional context
Study Committee on Demographic
Ageing
MALTESE
MIDAS
Technical support
Assumptions and hypotheses AlignmentOn projections
FINANCIALSUSTAINABILITYOF THE PENSIONSYSTEM
ADEQUACY OF PENSIONS
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THE MALTESE SYSTEM: MODEL FOR ANALYSIS OF LONG TERMEVOLUTION OF SOCIAL EXPENDITURE
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SOCIAL BENEFITS EXPENDITURE BY SCHEME AND REGIME
SOCIODEMOGRAPHICSCENARIO
DEMOGRAPHICSCENARIO
SOCIODEMOGRAPHIC PROJECTIONBy age group and gender
MACROECONOMIC SCENARIO
MACROECONOMIC PROJECTION:Employment, GDP, wages, …
DEMOGRAPHICPROJECTIONBy age group and gender
Number of beneficiaries
Average amount
HEALTH CARE EXPENDITURES
SOCIAL SECURITY ACCOUNTSRevenues, expenditures, balance, debtSOCIAL POLICY
SCENARIO
BUDGETARY POLICY SCENARIO
GENERAL GOVERNMENT ACCOUNTSRevenues, expenditures, balance, debt
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MIDAS - Microsimulation for the Development of Adequacy and Sustainability
Starting dataset: the Panel Dataset on Belgian Households PSBH of 2002
DEMOGRAPHICMODULE
LABOUR MARKETMODULE
PENSION & BENEFITS MODULE
t+1
Mortality, fertility, education,‘marriage market’Employment, public and privatesector, civil servants, unemployment,disability, CELS, retirementHours of work per month, months of work per year,earnings per hour
1st pillar pension benefits- employees’ scheme- civil servants scheme- independent workers’ schemeCELS benefitsdisability pension benefitsunemployment benefitswelfare benefits
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Consistency between MALTESE and MIDAS
1. Both MIDAS and MALTESE include all policy measures introduced up to 2009, including the increases by 17 en 13.7% of the minimum right per career year and the Guaranteed Income of the Elderly between 2006 and 2007.
2. Both models apply the parameters of the Generational pact :• wage ceiling and minimum right per career year in employees’
pension benefit : 1.25%• indexation pension benefits employees’ scheme and independents’
scheme wage-related : 0.50%• indexation minimum (pension) benefits: 1%
3. Midas aligns to MALTESE, and hence adopts its projections
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The application of alignment in MIDAS
State alignment• fertility, mortality (to gender, age, simulation year)• employment rate (to gender, age category, simulation year)• unemployment rate(idem)• rate of independent workers (idem)• rate of civil servants (idem)• disability rate (idem)• CELS rate (idem)
Monetary alignment• gross wages (to gender and simulation year)
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Replacement ratio- base scenario
4050
6070
80
2000 2010 2020 2030 2040 2050 2060year
Men WomenHP filter - Men HP filter - Women
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Poverty risk to status – base scenario
010
2030
4050
2000 2010 2020 2030 2040 2050 2060Year
Total population Workers Retirees Unemployed Disabled
Source: MIDAS
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Income inequality (Gini) to status – base scenario
.15
.2.2
5.3
.35
2000 2010 2020 2030 2040 2050 2060Year
Total population WorkersRetirees
Source: MIDAS
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II. The financial consequences of social policy: two examples considered
1. An increase of the minimum right per career yearwith 17% from October 2006 on
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What does the minimum right per career year do?
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The budgetary impact of the increase of the minimum right per career year (% GDP)
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The impact of the increase of the Minimum Right per Career Year on poverty risk to status (%)
05
1015
20
2000 2010 2020 2030 2040 2050 2060Year
Total population - reference scenario Total population Workers - reference scenario Workers Retirees - reference scenario Retirees
Source: MIDAS
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The impact of the increase of the Minimum Right per Career Year on poverty risk to status (%)poverty line 70% of median equivalent income
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010
2030
40
2000 2010 2020 2030 2040 2050 2060Year
Total population - Reference scenario Total population Workers - Reference scenario Workers Retirees - Reference scenario Retirees
Source: MIDAS
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2. An increase of the Garanteed Income for the Elderly (InkomensGarantie voor Ouderen - IGO)
with 13,7% from December 2006 on
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II. The financial consequences of social policy: two examples considered
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The budgetary impact of an increase of the IGO with 13.7%
Increase of 0.045% GDP
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An increase of the IGO with 13.7%: what determines the budgetary impact?
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The impact of the increase of the Guaranteed Income of the Elderly on the Poverty risk to status (%)
05
1015
20
2000 2010 2020 2030 2040 2050 2060Year
Total population - reference scenario Total population Workers - reference scenario Workers Retirees - reference scenario Retirees
Source: MIDAS
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III. Work in PROGRESS and conclusions
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1. Consistency of MIDAS with MALTESE
2. extentions of MIDAS
1. Gross-net trajectory
2. The 2nd pension pillar
3. Replacing the starting dataset by administrative data
4. Besides the PROGRESS deliverables, some extentions and further developments
are necessary: net immigration, weights, further monetary alignment, …
The goals of the PROGRESS project SIPEBE
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Conclusions
1. Thanks to PROGRESS and the collaboration with the Federal Public Service Social Security, the FPB is well under way to develop MIDAS into a tool for the assessment of pensions in conjunction with MALTESE
2. This presentation uses the capacity of joint analysis with both models to… Simulate the impact of the 17% increase of the minimum right per career year
Expenditures increased by 0.07% GDP in total, but impact will be gradual No impact on poverty risk with 60% poverty line Long-run impact of poverty risk with 70% poverty line
Simulate the impact of the 13.7% increase of the Guaranteed Income of the elderly
Expenditures increased by 0.045% GDP in total, roughly equally spread over all years Considerable and nearly immediate impact on poverty risk with 60% poverty line
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Consistency between MALTESE and MIDAS: alignment in MIDAS
Several procedures that aim to make the model reproduce one or more exogenous aggregates.
state alignment monetary alignment
State 1
State 2Persoon i
Ui < Pi
Pi=logit-1(βX)
Ui < 1-Pi
‘standard’ Monte Carlo simulation Aligned simulation to target x%
State 1
State 2Rangorde 1...n
Eerste xN personen
Rangordei=logit-1(βX+εi)
Overige (100-x)N personenRun the modelyi=βXi + ui (2001, t)
Sum to aggregate ; derive aggregate growth rate gY
Monetary alignment target growth rate gxt
Derive corrected growth rates
Run the modelyi=βXi + ui (2001)
Apply corrected growth rate -> t
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