Pension Adequacy and Inequality under Reform Scenarios

This paper examines the effect of three potential reforms in the Belgian pension system and uses a counterfactual analysis to assess whether they improve pension adequacy and reduce inequality across various measures. To ensure budget neutrality, the yearly pension expenditure is held fixed by adapting the replacement rate accordingly, allowing for a direct comparison to the current system. In a second step, the average gain/loss in pension entitlements is examined by marital status and gender to analyze which groups are supported by these reforms. The total effect is further decomposed into two components: the effects observed before budget neutrality is applied and those after its implementation. Results show that all reforms lead to an improvement of the system, even though the effect remains rather small. The largest impact can be obtained with the reform that addresses directly the effect of having children on the parent’s career.