Pension expenditure in our country will rise faster in the coming years than in the rest of the eurozone | Domestic

In 2019, public expenditure on pensions in Belgium was comparable to the euro area average. Belgium spent more in relation to its national income (GDP) than the Netherlands and Germany, but less than other highly indebted countries such as Italy, France and Spain.

But we are giving up that middle position. Our pension expenditure will rise faster in the coming years than in all reference countries. By 2070, they will absorb 3 percent more of national income than the average in the euro area, despite the fact that our country is the best demographic of the countries mentioned. For every 100 20-64 year olds in our country, there are now 35 people over 65. That will rise to 53 in 2070. In the eurozone it will go from 38 to 59 in that period.

If we want to slow down that evolution, there are a number of options, says the National Bank. Either reduce expenditure by making people retire less quickly or by paying them less, or increase national income by putting more people to work and/or increasing their productivity.

Raising the retirement age is not an obvious option in the short term, the researchers say. Cutting pensions – one of the least productive government expenditures – could be a step in the right direction. In 2019, the average pension in our country was 1,628 euros, a quarter above the average for the euro zone. On the other hand, it amounted to only 33 percent of the average wage in our country, which corresponded to the average in the eurozone. That ratio will drop to 25.6 percent in 2070.

It is remarkable that despite the relatively large average pension in our country, Belgian retirees do not run the lowest risk of poverty. But in order not to increase the risk, the highest pensions should preferably be capped.

The most welfare-enhancing policy measure would be to increase employment among older workers, as this would simultaneously reduce pension expenditure. Increasing productivity would be more difficult to manage. Nevertheless, to achieve an effect, a combination of these measures will be necessary, according to the National Bank.