Assessing the sustainability of Romanian pension system

Objectives: Like all the European countries, Romania is confronted with an ageing population, driven by progress in life expectancy and low fertility rates and with a ratio of the elderly-to-working age group which has already reached unprecedented levels and projected to increase further. This paper evaluates the implications of an ageing population on the Romanian pension system.

Data/Methods: Using the demographic model based on AWG assumptions, we try to simulate some scenarios (realistic, optimistic and pessimistic) of the sustainability of public pensions. The pension projections of the European Commission for the period 2008-2060 will be brought up-to-date in the context of the challenges posed by the global economic crisis. The sensitivity analysis will be also used in order to identify the economic and demographic variables that influence the prospects of the Romanian pension system.

Expected Results: The analytical results will be translated into policy recommendations deemed indispensable for the fiscal sustainability of the Romanian pension system, such as the introduction of a new pension formula based on notional accounts derived from the Scandinavian model, but extended to the whole length of life and including all social services and taking into consideration the national traditions, problems and priorities.