ABSTRACT
In modern societies old age is synonymous with retirement. It describes a third stage in the life course which is no longer bound to gainful work because earned income is replaced with pensions and accruals from former savings. Ongoing increases in life expectancy have extended the retirement period, and while a lengthened life span is regarded as a blessing for the individual, a concomitantly prolonged average period of pension receipt poses substantial challenges for public and private pension schemes. Public pensions account for the largest spending item of most developed welfare states and, in view of the demographic ageing process, measures to moderate the growth of pension expenditures rank high on Organisation for Economic Cooperation and Development (OECD) countries’ political agenda since about the 1990s. Old age not only means pension payments; the elderly are also the main consumers of health and longterm care, thus, further increasing the old-age bias in welfare spending. Along with their rising electoral weight, reforms that attempt to contain the growth of social expenditure relating to the elderly may become an ever more difficult exercise in democratic polities. In this chapter we will first glance at the changed meaning of old age, centrally shaped by the
development of pension systems. The subsequent section deals with the different functions and designs of pension systems, with a focus on developed welfare states. We then discuss the outcomes of pension policy, in particular the economic situation of the elderly. All welfare states are confronted with similar challenges resulting from ageing populations. After briefly looking into the results of demographic projections, the main part of the fifth section will deal with reforms of pension systems and the problems for present or future retirees that may arise from the (non-)adjustments. Giving private pensions a larger weight in the public-private mix of retirement income has been an important element of recent reform activities. These pre-funded components are exposed to fluctuations of financial markets which possibly threaten income security in old age. The final section reviews the impact of the global crisis of financial markets in 2008 and its aftermath on present and future pensioners.
