Care and Pensions

In brief

This study reports results from the use of standard pension simulations to demonstrate the impact of stylized labour market choices, that women may make, on the pension benefit that they later receive. It covers five countries, Belgium, Portugal, Slovenia, Luxembourg and Liechtenstein, and focuses on complete or part-time career interruptions in response to care responsibilities for a child or an older relative.

To read

See the country comparative report on caring and pensions here

Detailed results from standard simulations of pension outcomes

Below we present results from the simulation of pension outcomes for various hypothetical different career interruptions and work-life earnings profiles for five countries: Belgium, Liechtenstein, Luxembourg, Portugal and Slovenia. The simulations are based on 'current policy', taking into account existing relevant pension and tax-benefit rules. Detailed descriptions of the assumptions behind each modelling scenario and explanations of the results are available in country reports (PDF) here: BE, PT, SI, LU and LI. Here is the comparative report for all five countries.

We focus on the effect of full- and parttime career interruptions of 6 years due to care activities. Specifically, childcare is assumed to begin at age 30 and care for an older relative at age 54. Results are reported relative to a situation of an uninterrupted full-time career. While pension systems in the five countries are gender neutral, benchmark wage profiles are based on average earnings of women (see discussion on wage curves here).

Four variants are considered for the ages 30 and 54: a) eligibility for pension credits related to care activities, b) assuming no pension credits, c) introducing a period of unemployment prior to caring, d) replacing women’s earnings profiles by earnings profiles for men.

For each of the variants (and ages), 4 options for part- and fulltime caring are simulated (in addition to the benchmark full time employment):

Part time, 80% for 6 years (PT 80%, 6 years)
Part time, 50% for 6 years (PT 50%, 6 years)
Full time caring for 6 years (No work 6 years - no w/p)
Full time caring for 6 years with a wage penalty (No work 6 years - w/p)

The last option includes a wage penalty from exiting the labour market fully for 6 years, which implies that for the rest of her career, her wage be will lower than that of someone with an uninterrupted career. The implementation of the wage penalty is discussed in more detail here. The modelled individuals are assumed to be born in 2000, entering the labour market around 2020 (exact details are in the country reports) and retire at the Statutory Retirement Age in the 2060s or 2070s).

All results are reported as percentage deviations from the pension in case of full time careers (without interruptions) for three levels of educational attainment (ISCED 0-2, ISCED 3-4 and ISCED 5+). Interactive results are available for each variant/age pair for all countries, followed by all variant/age pairs by country. The full data set is downloadable in .csv from here.

Childcare at age 30: Results by variant

Pension credits for child care

This variant shows the rdeuction in pension relative to a person working a full career full time for various options for childcare. During the career interruption the person is assumed to receive pension credits in line with current policy for parts or all of the period (depending on each country's pension system).

Adult care at age 54: Results by variant

Pension credits for adult care

This variant shows the reduction in pension relative to a person working a full career full time for various options of caring for an older relative starting at age 54. During the career interruption the person is assumed to receive pension credits in line with current policy for parts or all of the period (depending on each country's pension system). In Portugal and Slovenia there are no pension credits related to care for older relatives.

Results by country

The four different variants for each age (30 and 54).

Belgium, childcare at age 30

Belgium, adult care at age 54

For more information

Dekkers, Gijs, Karel Van den Bosch, Mikkel Barslund, Tanja Kirn, Nataša Kump, Philippe Liégeois, Amílcar Moreira, Nada Stropnik, Kara Thierbach, Vincent Vergnat, 2020. 'Impact on pension outcomes of life events: standard simulations from five European countries'. Mimeo Federal Planning Bureau. Deliverable of the MIGAPE project.
Dekkers, Gijs, Karel Van den Bosch, 2020. '', Deliverable of the MIGAPE project. Version 27/04/2020.
Dekkers, Gijs, Karel Van den Bosch, 2020. 'Results of the Standard Simulations for Belgium', Mimeo Federal Planning Bureau. Deliverable of the MIGAPE project. Version 18/02/2021.
Kirn, Tanja and Thierbach, Kara, 2020. 'Results of the Standard Simulations for Liechtenstein', Mimeo University of Liechtenstein. Deliverable of the MIGAPE project. Version 30/04/2020.
Kump, Nataša, Nada Stropnik, 2020. 'Results of the Standard Simulations for Slovenia'. Mimeo IER. Deliverable of the MIGAPE project. Version 21/09/2020.
Liégeois, Philippe, Vincent Vergnat, 2020. 'Hypothetical Prospective Simulation of Pensions for Luxembourg'. Mimeo LISER. Deliverable of the MIGAPE project. Version 26/03/2021.
Moreira, Amilcar and Craveiro, Daniela, 2020. 'Results of Standard Simulations for Portugal'. MIGAPE project report, Version 26/03/2021.