What Makes Pension Reforms Sustainable

Policymakers pushing pension reforms have tended to justify changes on the basis that they would make systems more sustainable by lowering future spending on pensions. This is a rather narrow interpretation of sustainability that fails to consider that other fiscal programs may need to accommodate the impact of reforms that reduce pension system adequacy. In this light, this article argues that in order to correctly assess the sustainability of pension reforms, one needs to adopt a more holistic framework that encapsulates the interaction between pension system goals and constraints. In a number of countries, reforms focused solely on reducing future spending were followed by reforms that restored generosity. A holistic approach to assess pension sustainability could help limit this cycle of reform and increase trust in pension systems.