Pension systems are institutional structures for intergenerational exchange. They work in a long time horizon. Income allocation within the pension systems is spread over many decades. Although neither governments nor markets operate in a perspective comparable to the pension one, societies do not have any other kind of institutions that could be used to cope with long-term challenges. Dealing with consequences of population ageing requires going beyond that bipolar way of thinking.
The population change we face creates the fundamental challenge for societies. The way they try to deal with demographic trends will decide about their future. Unfortunately, there is no universal prescription for dealing with this challenge. Various casual approaches, often even called “reforms”, can help only a bit. The problem is they remain within the traditional way of thinking that was developed decades or even century ago. Hence they cannot substantially contribute to adjusting the pension institutional structure to the needs of the 21st century.
PPG research and policy advice is based on a forward-looking approach. In our thinking on pensions for the 21st century we apply and promote an approach based on intergenerational equilibrium. This means seeking ways to re-establish a balance between short-term needs and long-term goals.