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The Generation Pact and, before that, the Councils of ministers held in Gembloux and Ostend, have led to adjustments in the pension scheme for self-employed workers: an increase in the minimum pension, welfare adjustments (including the “welfare bonus”), a pension bonus and adjustment of pension penalties (“malus”). The MoSES model as used to estimate the budgetary cost of these reforms and to assess their impact on the average pension benefit for the self-employed. The Working Paper first gives a general survey of the model and its new functionalities (some of which have been specially developed in order to model the new measures) and presents the results of the simulations.
MoSES (Model of the Self-Employed Scheme) makes forecasts about the average annual pension of self-employed workers, in co-ordination the long-term modelling system MALTESE. The first version of MoSES took the following parameters into account: sex, type of activity (on which the level of income depends), type of career (homogeneous or mixed), career length, type of pension (retirement pension, survivor’s pension), and the pension tariff (for a household or a single person) chosen by each individual. It then projected the “stock” of pensioners on the basis of the sex, marital status and age of the beneficiaries, as well as the pension tariff and the type of pension. In the new version, an essential variable has been added: the age of retirement (a specific career length is associated with each age and entry category). With the new version, it is now possible to make a double projection at the level of the stock: a projection for the beneficiaries of the minimum pension and a projection for other beneficiaries (each of them receiving a specific average pension benefit). From now on, it will be possible to analyse several characteristics of the evolution of the average pension in the self-employed scheme. It shows, for instance, that the growth rate of the average pension benefit – and, hence, of pension expenditure – depends more on the growth rate of the minimum pension – which is laid down by law – than on other variables such as income growth or the income ceilings of the self-employed.
Due to the new modelling, we can analyse a wide range of measures. Indeed, the model incorporates typical cases and stresses two essential parameters of the scheme: firstly, the minimum pension benefit is preponderant, and, secondly, the majority of beneficiaries receive a mixed pension benefit (i.e. from both the self-employed and the wage-earner scheme). The model not only assesses the budgetary cost of measures for the short, medium and long term but it can calculate their impact on the average pension benefit for all beneficiaries or for specific categories such as women, beneficiaries of homogeneous pension benefits, beneficiaries of a survivor’s pension and beneficiaries of pensions that started before a particular year, etc.
By analysing the measures that have been adopted recently within the framework of the Council of Ostend and the Generation Pact, MoSES was able to highlight the fact that welfare adaptations – which, in the case of wage-earners, apply to almost all pensions – only have a limited impact on the self-employed, as a great many of them rely on the minimum pension anyway. Indeed, a welfare adaptation of 2% amounts to a mere 0.9% rise in the average pension benefit for self-employed men and a 1.2% rise for self- employed women (the reason being that even after the rise is applied, a great number of pensions remain below the minimum level). The model has also showed that raising the minimum pension has a greater impact on average pensions in the self-employed scheme. However, such a measure leaves several categories of beneficiaries aside. For example, many women who are on a very low pension would not benefit from such a measure, because they have not worked for long enough to get the minimum pension. Still, a 16% rise of the minimum pension over a period of four years leads to an average pension benefit increase of 12.3% for men and 10.1% for women in the self-employed scheme.
The pension scheme for the self-employed is more complex and far less homogeneous than the scheme for wage-earners. Some measures that are worked out with the beneficiaries of the wage-earner scheme in mind – i.e. the vast majority of pensioners – sometimes fail to reach their objective or have a different impact in the self-employed scheme.
Social protection, demography and prospective studies