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“Aging Europe and the Looming Pension Crisis.”

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“Aging Europe and the looming pension crisis.”

1. Why have governments tended to avoid the problem of pension reform? Why is it harder to avoid the problem in the 21st century?

How the demographic changes have created problems for pensions?
Governments are worried about the sustainability of current pension schemes as changes in demographics are indicating that these schemes will not be able to sustain themselves in a few years time. Fertility rates heavily increased in the post World War II period (1960 a representative year) and decreased subsequently, creating the “baby boom”, which has been an important factor in the 21st century population aging. Current fertility rates are experiencing historic lows; at an European Union (EU ) average 1.58 live births per woman, it is significantly below the level needed to replace the population (2.1) . Such changes have significantly increased the average percentage of EU population aged 65 and over, from 9.6% in 1960 to 16% in 2010, which is expected to increase to 22.6% by 2030 . This statistic shows that increasingly more people will have to be supported by government pensions. In the EU the average life expectancy at birth has risen by 10 years over the last 50 years , which means that pension schemes have to support each member increasingly longer than before. The average old age dependency ratio (OADR) in the EU, which measures the amount of elderly people for every 100 people of working age, has increased from 15% in 1960 to 23.6% in 2010 and is projected to hit 36.6 in 2030 . This means that there will be an insufficient amount of working age people to support the pension schemes for the rising number of elderly people.

Hence, why there needs to be pension reform?
If new reforms are not introduced to the existing pension schemes, elderly people that qualify as eligible for pensions will not be receiving…...

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