Monday, January 21, 2013

21/1/2013: Fitch: Ageing Costs: The Second Fiscal Crisis

One theme I've been tracking over some time now is the longer-term state liabilities.

Here's a note from Fitch on the matter:

"Without the implementation of mitigating reforms the median country analysed in our new report today is projected to see its budget worsen by 0.6% of GDP by 2020 and 4.9% of GDP by 2050. Consequently, many of these countries would experience escalating government debt-to-GDP ratios, with the average EU27 debt-to-GDP projected by Fitch to rise by 6.9% by 2020 and 119.4% by 2050."


"According to the model, Japan, Ireland and Cyprus face the largest jump in ageing costs over the next decade..."

Here's a summary table:

And a chart summarising policy pressures:

Guess how we are doing in terms of mitigating pensions pressures? Oh, not too well to begin with and are getting worse:

So what measures does Fitch list as Ireland's mitigation means so far planned?

"Tax relief on private pension contributions; Abolition of exemption from contribution to public pension scheme for low-wage earners; Pension levy on public sector wages; Reduction in pension tax privileges. Eligibility age for various pension schemes increased."
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