The Effects of Changing Marital Status Patterns on Social Security Expenditures in the Netherlands, 1985-2050

Keilman, N. (1991). The Effects of Changing Marital Status Patterns on Social Security Expenditures in the Netherlands, 1985-2050. IIASA Collaborative Paper. IIASA, Laxenburg, Austria: CP-91-015

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Abstract

Projections of expenditures for old-age pensions, survivor pensions, and disability pensions were made for the period 1985-2050 on the basis of future developments in the population structure by age, sex, and marital status. Five demographic scenarios were formulated: (i) a Benchmark scenario, with demographic rates kept constant at their 1980-84 level; (ii) a Fertility scenario, with a rise of the Total Fertility Rate (TFR) towards replacement level; (iii) a Mortality scenario, with reductions in mortality rates of 30 percent for females, and 45 percent for males; (iv) a Western scenario, which combines extreme demographic conditions of several West European countries: a TFR of 1.28, proportions never-marrying of one-third, one-third of all marriages ending in divorce, and male and female life expectancies of 74 and 81 years, respectively; and a Realistic scenario, which is the only one to include international migration, and which corresponds closely to the official population forecasts for the Netherlands.

Two pension scenarios and two labor market scenarios were combined with the demographic scenarios. The current pension system, with its flat benefit rate, was combined with all five demographic scenarios. Also, the consequences of the system which was in use in the Federal Republic of Germany in 1985 were traced. Finally, the impact of high female labor force participation, and a rise in the average age at retirement were investigated.

The results indicate that changes in demographic conditions (e.g. a fertility rise, or a persistent influx of immigrants) cannot prevent increases in and funding problems for pension expenditures in the Netherlands. Linking pension benefits to the labor market history of the individuals concerned brings no relief either. However, raising the average age at retirement would, to a large extent, avoid funding problems for old-age pensions for a great deal, with a large amount of overfunding in the short run.

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