The EU Rules & Actions

Workers and the self-employed in retirement have the right to a pension commensurate to their contributions and ensuring an adequate income. Women and men shall have equal opportunities to acquire pension right. Everyone in old age has the right to resources that ensure living in dignity. This is the EU.

This is the objective pursued by the EU and, at the moment, the EU institutions collect statistics and prepare reports on the situation in Europe to offer food for thought to national governments.

Below, the latest report.
​

The 2021 Ageing Report

The Economic and Financial Affairs (ECOFIN) Council gave mandate to the Economic Policy Committee (EPC) to update and further deepen its common exercise of age-related expenditure projections, on the basis of a new population projections by Eurostat. 

In 2021, EPC and the European Commission Services presented their seventh Report with long-term projections of the budgetary impact of the ageing population in the EU Member States (and Norway), covering the period 2019–2070. In response to the mandate, the EPC mandated a working group, the Ageing Working Group (AWG) under the chairmanship of Godwin Mifsud, to take forward the work needed to discharge this remit. 

​Executive Summary

1. 2021 AGEING REPORT: MANDATE, PURPOSE, COVERAGE AND OVERVIEW

Mandate and purpose of the 2021 Ageing Report

The sustainability of public finances in the EU can be better monitored and safeguarded if its analysis rests on reliable and comparable information on possible challenges, including those stemming from the demographic changes in the coming decades. For this reason, the ECOFIN Council gave a mandate to the Economic Policy Committee (EPC) to produce a new set of long-term projections of age-related expenditure by 2021, on the basis of new population projections provided by Eurostat. To fulfil this mandate, the EPC and the Commission services (Directorate-General for Economic and Financial Affairs - DG ECFIN) agreed on a work programme with broad arrangements to organise the projections and validate its assumptions and methodologies (see below the overview of the projection exercise for details).

The long-term projections show where (in which countries), when, and to what extent ageing pressures will accelerate, as the baby-boom generation retires, and as the EU population is expected to live longer in the future.
Hence, the projections are helpful in highlighting the immediate and future policy challenges for governments posed by projected demographic trends. The report provides a very rich set of information at the individual country level, which covers a long time-span (up to 2070), compiled in a comparable and transparent manner.

Click to open the full Report

​The Ageing Report projections feed into a range of policy debates and processes at EU level.
In particular, they are used in the context of the coordination of economic policies to identify relevant policy challenges and options (in the context of the European Semester, so as to identify policy challenges, and as part of the Stability and Growth Pact, among others, in setting the medium-term budgetary objectives (MTOs) and in the annual assessment of the sustainability of public finances) (1 ). In addition, the projections support the analysis of the macroeconomic impact of population ageing, including on the labour market and potential economic growth.

Coverage and overview of the 2021 long-term projection exercise

The long-term projections are based on commonly agreed methodologies and assumptions. They take as starting point Eurostat's population projections for the period 2019 to 2070 (2 ). In addition, the EPC, on the basis of proposals prepared by the Commission services (DG ECFIN) and the Ageing Working Group (AWG) of the EPC, agreed upon assumptions and methodologies common for all Member States to project a set of key macroeconomic variables covering the labour force (participation, employment and unemployment rates), labour productivity, and the interest rate (see Graph 1). This set of variables allowed deriving GDP for all Member States up to 2070 (3 ). The macroeconomic assumptions on which this report is based were agreed upon in the first half of 2020 and published in November 2020 (4).

On the basis of these assumptions, separate budgetary projections were carried out for four government expenditure items, namely pension, health care, long-term care and education (5 ). The projections for pensions were run by the Member States using their own national model(s), reflecting current pension legislation (6 ). In this way, the projections benefit from capturing the country-specific circumstances prevailing in the different Member States as a result of different pension legislation, while at the same time ensuring consistency by basing the projections on commonly agreed underlying assumptions. The projections for health care, long-term care and education were run by the European Commission services (DG ECFIN) on the basis of a common projection model for each expenditure item, taking into account country-specific settings where appropriate. The results of these separate projections are aggregated to provide an overall projection of age-related public expenditure (see Graph 1).

The long-term projections include a broad range of alternative scenarios and sensitivity tests, reflecting the uncertainty surrounding the baseline scenario. The baseline projections (or AWG reference scenario) are made under a 'no-policy-change' assumption, generally illustrating the evolution of age-related expenditure if current policies remain unchanged. However, there is uncertainty surrounding these projections, and the results are strongly influenced by the underlying assumptions. For this reason, a broad set of alternative scenarios and sensitivity tests are carried out, highlighting to which extent public expenditure projections are sensitive to key assumptions.

This report is structured in two parts. The first part describes the underlying assumptions: the population projection, the labour force projection and the macroeconomic assumptions. The second part presents the long-term budgetary projections on pensions, health care, long-term care, and education. The third and fourth parts contain a Statistical Annex that gives an overview of the main assumptions and macroeconomic projections, as well as projection results of age-related expenditure items at the aggregate EU/EA level and by country.

2. THE ECONOMIC AND BUDGETARY IMPACT OF POPULATION AGEING

2.1. Projected demographic and macroeconomic developments

Significantly lower working-age population is projected for the EU over the coming decades

The demographic projections over the long term reveal that the EU is ‘turning increasingly grey’ in the coming decades. The total population of the EU is projected not only to decline over the long term, but also to experience a significant change in its age structure in the coming decades (see Graph 2). According to Eurostat, the overall population is set to shrink by 5% between 2019 (447 million) and 2070 (424 million). The working-age population (20-64) will decrease even more markedly from 265 million in 2019 to 217 million in 2070, reflecting fertility, life expectancy and migration flow dynamics. ​

Population ageing will affect both men and women, with a significant increase of the median age. The projected population in 2070 is lower than or close to the population in 2019 in all age cohorts between 0 and 64 years old (up to 69 years old for women). Conversely, in all age cohorts of 65 years old and above (above 69 years old for women), the projected population in 2070 is higher than in 2019. Moreover, while in 2019, the largest cohort for both males and females was 50-54 years old, in 2070 the largest cohort will be 60-64 years old for women and 55-59 years old for men (see Graph 2). Overall, the median age will rise by 5 years for both men and women by 2070 (reaching 47.3 for men and 50.3 for women). Similar developments are projected for the euro area.

By 2070, the EU's share of the total world population is forecast to shrink to 3.7%, from its current value of 5.7% (2020), and the share of the old people in its population will be the second highest globally among large economies.

Without taking into account the impact of COVID-19 mortality and life expectancy, the projected changes in the population structure reflect assumptions on fertility rates, life expectancy and migration flows. The total fertility rate is assumed to rise from 1.52 in 2019 to 1.65 in 2070 for the EU as whole. This trend follows from an assumed process of convergence across Member States over the very long term to the country with the highest fertility rate (in 2019). In the EU, life expectancy at birth for men is expected to increase by 7.4 years over the projection period, from 78.7 in 2019 to 86.1 in 2070. For women, life expectancy at birth is projected to increase by 6.1 years, from 84.2 in 2019 to 90.3 in 2070, implying some convergence of life expectancy between men and women. The biggest increases are projected for the Member States with the lowest life expectancies in 2019. Annual net migration inflows to the EU are projected to decrease from about 1.3 million people in 2019 to 1.0 million people by 2070, representing a decreased contribution from 0.3% to 0.2% of the total population. (7 ) However, there are large differences between Member States.

The projected demographic old-age dependency ratio will sharply increase over the long-term

​The old-age dependency ratio is projected to sharply increase over the long-term, with less than two working-age persons for every person aged 65 and more by 2070. The demographic old-age dependency ratio (people aged 65 and above relative to those aged 20 to 64) in the EU is projected to increase by 24.7 pps. over the projection period, from 34.4% in 2019 to 59.2% in 2070. This implies that the EU would go from having about three working-age people for every person aged over 65 years to only having less than two working-age persons. Most of this increase is driven by the very old-age dependency ratio (people aged 80 and above relative to those aged 20-64) which is rising by 15.8 pps. (9.9% to 25.7%) over this horizon.


Overall participation rates to the labour market are projected to rise, in particular for older workers, supported by pension reforms, and for women

Legislated pension reforms are projected to have a sizeable impact on the participation rate of older workers, as captured by the Commission cohort simulation model. Participation rates are projected using a cohort simulation model (CSM), which allows in particular taking into account the impact of legislated pension reforms on the participation rate of older workers (including measures to be phased in gradually). In most of the EU Member States, legislated pension reforms are projected to have a significant impact on the labour market participation of workers aged 55-64, with differences across the EU depending on their magnitude and phasing in. The projections show an average increase of approximately 10 pps. in the participation rate for this age category, from 62.3% on 2019 to 71.9% in 2070.

Larger increases in total participation are projected for women, reflecting the rising participation of younger generations to the labour market and the alignment of retirement age with men. The expected increase in the participation rates between 55-64 years old is much higher for women (about 13 pps. on average) than for men (close to 6 pps. on average), reflecting the progressive convergence of participation rates across genders in a number of countries. Overall, the total participation rate for those aged 20-64 is projected to rise from 78.2% in 2019 to 80.7% in 2070 in the EU as a whole and from 78.4% to 81% in the euro area. This is being driven by higher female participation, which is projected to rise by 4.4 pps. compared with 0.5 pps. for men in the EU and by 4.6 pps. compared with 0.4 pps. for men in the euro area.


Yet, labour supply will decline under the effect of the projected drop of the working-age population

Despite the increase of the participation rate, total labour supply is set to decline over the longterm, reflecting the powerful demographic driver. Labour supply for those aged 20 to 64 in the EU is projected to fall by 15.5% over 2019-70, of which 2.8% by 2030 and a further 13.1% between 2030 and 2070. In the euro area, the projected fall in labour supply is 12.6% over the entire period, of which 2.2% takes place between 2019 and 2030 and a further 10.7% between 2030 and 2070.


Further rises in employment rates are projected…

The total employment rate is projected to increase over the long-term, including as a result of the assumed convergence to (generally lower) equilibrium unemployment rates across the EU. Unemployment is in particular projected to decline slightly in the EU from 6.8% in 2019 to 5.8% in 2070, under the general assumption that the rate will converge to estimated ‘NAWRUs’ (8 ). Euro area unemployment is assumed to fall more markedly from 7.7% in 2019 to 6% in 2070. Hence, given the population projection, the labour force projection and the unemployment rate assumptions, the total employment rate (for persons aged 20 to 64) in the EU is projected to increase from 73.1% in 2019 to 76.2% in 2070. In the euro area, a somewhat bigger increase is expected, with the employment rate rising from 72.6% in 2019 to 76.3% in 2070.


…while the level of employment is projected to fall

The population trends have significant effects on labour market, and four distinctive periods can be identified for the EU (See Graph 3): i) 2007-2010: the working-age population was growing, but employment was sluggish as the global financial crisis weighed on job growth during this period; ii) 2011-2019: the working-age population started to decline with the baby-boom generation entering retirement. However, the reduction in unemployment rates, and in particular, the increase in the employment rates of women and older workers cushioned the impact of demographic change, and the overall number of persons employed started to increase during the latter part of this period; iii) 2020-23: the COVID-19 crisis led to a temporary reduction of the employment rate in 2020, followed by an assumed recovery until 2023, with the overall number of persons employed gradually going back to (close to) pre-crisis levels; iv) from 2024: the projected increase in employment rates is slower, as trend increases in female employment and the impact of pension reforms will be less pronounced. Hence, both the working-age population and the number of persons employed are set to fall over the rest of the projection period. Labour supply and employment for those aged 65-74 will experience somehow ​different trends, with an overall increase up until the mid-2030s, reflecting the extension of working lives, followed by a stabilisation over the rest of the projection period. 

Stable potential GDP growth projected over the long-term, but growth relying only on productivity increases

In the EU as a whole, the average annual GDP growth rate is projected to remain fairly stable over the long-term. An average annual potential GDP growth of 1.3% in 2019-2070 is projected for the EU as a whole under the baseline scenario. (9 ) Growth will average 1.2% up to 2030, rise slightly to 1.3% in the 2030s and further to 1.4% in the 2040s, where it is expected to remain through to 2070. The projections for the euro area follow a similar (though slightly lower) trajectory, with annual growth of 1% up to 2030, 1.2% in 2031-2040 and 1.4% in 2041-2070. Overall, the average euro area growth rate in 2019-2070 is projected at 1.3%. In per capita terms, developments are projected to be similar, with average potential GDP growth of 1.4% in the EU (and 1.3% in the euro area).

The sources of GDP growth will change dramatically over the projection horizon. Labour will make a negative contribution to growth in both the EU and the euro area over the projection horizon due to two opposite effects. On the one hand, an assumed increase of employment rates will make a positive contribution to average potential GDP growth. On the other hand, this is more than offset by a decline in the share of the working-age population, which has a negative influence on growth. As a result, total employment will decline steadily over the projection period, and labour input is expected to contribute negatively to output growth on average over the projection period (by -0.2 pps. in the EU and by -0.1 pps. in the euro area). Hence, labour productivity growth, driven by TFP growth, is projected to become the sole source of potential output growth in both the EU and the euro area. Annual growth in productivity per hour worked is projected to increase from less than 1% to 1.5% by the 2030s and to remain fairly stable at around 1.6% throughout the remaining projection period. As a result, average annual labour productivity growth equals 1.6% in 2019-2070. A similar trajectory is envisaged in the euro area, though with average productivity growth of only 1.4%. The implications of a failure of the projected rise in TFP growth to materialise are the subject of analysis in the risk scenarios.

​2.2. Long-term budgetary projections

Long-term budgetary projections include a baseline scenario, and a range of sensitivity tests to capture the uncertainty surrounding the underlying assumptions. The fiscal impact of ageing is projected to represent a significant challenge in almost all Member States, with effects becoming apparent already during the next two decades in many countries. As in previous long-term projection exercises, a baseline scenario (the AWG reference scenario) focuses on the budgetary impact mostly due to demographic developments. Additionally, acknowledging the considerable uncertainty as to future developments of age-related public expenditure, a set of sensitivity tests are carried out to illustrate the extent to which the public expenditure projections are sensitive to key assumptions on demographic, labour force and productivity trends, as well as on (non-demographic) cost drivers’ developments (see section on risk scenarios below). In the report, given the huge uncertainty related to the on-going COVID19 crisis, two additional scenarios were prepared, describing the potential macroeconomic impact of the pandemic (the “lagged recovery scenario” and the “adverse structural scenario”).
​

Baseline projection results

In the baseline scenario, the total cost of ageing (including pension, health care, long-term care and education expenditure) is set to increase over the long-term at the EU/EA aggregate level. (10) The total cost of ageing, which stood at 24% of GDP in 2019, is projected to rise by 1.9 pps. of GDP in the EU by 2070. In the euro area, it is projected to rise by 1.7 pps. over the same period (from 24.6% of GDP in 2019) (see Graph 4 and Table 1).

The peak in age-related expenditure as a share of GDP takes place around the middle of the projection horizon. For a majority of countries, the highest value is reached before the end of the projection horizon (see Graphs 4 and 7). This time profile results primarily from the projection of pension expenditure, given that the impact of reforms often takes a long time to set in. In addition, in several countries, the population ageing effect peaks before 2070 (the old-age dependency ratio does not increase over the entire projection horizon). Hence, even if pension expenditure (as a share of GDP) is projected to increase modestly over the whole projection period, and even decrease as from the mid-2040s, its rise during the coming two decades is set to be pronounced. 

There is however considerable variety across EU Member States and also in the profile over time in the long-term spending trends (see Graphs 4, 5 and Table 1). According to the projections: 

− A fall in total age-related expenditure relative to GDP is projected in eight Member States (EL, EE, PT, FR, LV, ES, HR and IT). In all of these countries, a decline in the pension-to-GDP ratio is projected over the long-term (exceeding 3 pps. of GDP in EL and PT). Yet, with the exception of EL, EE and LV, the overall fall in expenditure is projected to follow a rise to levels above the current average for the EU, particularly significantly in IT and PT (at or above 2.5 pps. of GDP).

− The age-related expenditure ratio is expected to rise moderately (by up to 3 pps. of GDP) for another set of five countries (DK, LT, CY, BG and SE). With the exception of DK and SE, age-related expenditure is currently well below EU averages in these countries.
− The increase in the age-related expenditure ratio is projected to be the largest in the remaining fifteen countries (DE, FI, AT, PL, RO, NL, BE, HU, CZ, IE, NO, MT, SI, LU and SK), rising by 3 pps. of GDP or more, and with pension expenditure increasing in all of these countries (exceeding 3 pps. of GDP in LU, SI, SK, HU, MT, RO and IE). In FI, AT and BE, age-related expenditure is currently already above the EU average.

Looking at the components of age-related expenditure in the baseline scenario, the increase up to 2070 is mostly driven by long-term care and health care spending. Both spending items combined are projected to rise by 2 pps. of GDP (long-term care: +1.1 pps. of GDP, health care: +0.9 pps. of GDP) in the EU (EA: +1.8 pps. of GDP). After a projected increase of 1.1 pps. of GDP up to 2045 (EA: +1.2 pps. of GDP), public pension expenditure is set to return close to its 2019 level in the latter part of the projection horizon (EU/EA: 0.1 pps. of GDP). Education expenditure is projected to slightly decline by 2070 (EU/EA: -0.2 pps. of GDP) (see Graph 5 and Table 1).

​In several Member States, a decline of pension spending is projected over the long-term, as a result of past pension reforms, including measures reducing the benefit ratio and increasing the retirement age. A reduction of public pension spending as a share of GDP over the long term is projected in eleven Member States (EL, EE, PT, FR, LV, ES, HR, IT, DK, SE and PL), as a result of implemented pension reforms (see Table 1). These reform measures, including changes to the retirement age and to the pension benefit, have primarily been adopted to address fiscal sustainability concerns of pension systems. As a consequence, the public pension benefit ratio (average pensions in relation to average wages) is projected to decline in almost all Member States and on average by 9.5 pps. in the EU over the period 2019-70 (see Graph 6) (11). For some countries the decline is projected to be 20 pps. or more (ES, PT, EL, NO and PL). Pension reforms leading to low public pension benefit ratios could be politically challenging over the long run, and could give rise to upward risks to the pension expenditure projections, as reflected in the “offset declining benefit ratio “ scenario (see Part II Chapter 1). Recent policy reversals in some countries illustrate the importance of such risks.

Yet, the minimum pension benefit ratio should remain broadly stable over the long-term, while private pensions would allow completing pensioners’ income where available. Projected changes to the minimum pension benefit ratio are much smaller in most countries, as these pensions are indexed to wages (or similar). (12) Over the reporting countries, (13) the minimum benefit ratio is projected to decrease by 1.2 pps. on average. Hence, risks relating to minimum pensions being too low in the future are contained, due to higher indexation of minimum pensions compared with the general pension scheme. Moreover, many countries also have private pension schemes, and the total benefit ratio in 2070 is on average around 9 pps. higher (for countries where private pensions are reported) (14). 

Risk analysis supplements the baseline projection results

Given the very long time-span over which the projections are made, there is considerable upside and downside uncertainty as to future developments of age-related public expenditure. Hence, a set of alternative scenarios were run to assess the sensitivity of age-related government expenditure to different underlying assumptions (demographic, macro-economic and in terms of (non-demographic) cost drivers). Two of these scenarios deserve particular attention, and are defined as follows: (15)

− TFP risk scenario (16): In light of the trend decline in TFP growth performance over the last decades in the EU, and the increase projected for the future, due visibility and prominence should also be given to the risk of lower TFP growth in the future. Thus, a TFP risk scenario is included, with a lower TFP growth rate (converging to 0.8% instead of 1%). This scenario essentially shows that GDP growth could be much lower if future TFP growth was less dynamic than assumed in the baseline scenario, i.e. more in line with the growth rate (0.8%) observed over the last 20 years. In this scenario, potential GDP would grow by 1.1% on average up to 2070 in the EU and the euro area, as opposed to 1.3% in the baseline scenario.

− AWG risk scenario (17): Non-demographic drivers may exercise an upward push on costs in the health care and long-term care areas. In order to gain further insights into the possible importance of such developments, another set of projections was run, assuming a partial continuation of recently observed upward trends in health care expenditure, notably due to technological progress (based on empirical evidence that it has been a major driver of health-care spending). Moreover, an upward convergence of coverage and costs of long-term care towards the EU average is assumed in this scenario (18).

​Ageing costs could show a larger increase than projected in the baseline, in particular by as much as 4½ – 5 pps. of GDP by 2070 in the EU/EA under the AWG risk scenario. Graph 7 illustrates the projected increase in age-related expenditure over 2019-70 in the three different scenarios (Baseline, TFP risk and AWG risk) for the EU and the EA. In the EU as a whole, the total cost of ageing is projected to rise by 2.4 pps. of GDP in the TFP risk scenario, and by as much as 4.9 pps. of GDP in the AWG risk scenario in the period to 2070 (against 1.9 pps. of GDP in the baseline scenario). In the euro area, it is projected to rise by 2.2 pps. of GDP in the TFP risk scenario, and by up to 4.4 pps.​ of GDP in the AWG risk scenario over the same period (against 1.7 pps. of GDP in the baseline scenario).

​The TFP risk scenario primarily affects pension expenditure, projected to rise by ½ pps. of GDP more on average (EU and EA) up to 2070 compared with the baseline scenario. This is because pensions in payments are in many countries projected to rise in line with inflation, and therefore to be invariant to lower real wage growth. By contrast, it only has a small impact on health care and long-term care, as unit costs in these areas are closely linked to labour productivity growth and hence with wage growth. The projected increase in total age-related expenditure would be about ½ pps. of GDP higher than the baseline scenario up to 2070 in the EU and EA (see Graph 8 and Table 2). These results critically highlight the need for policies geared at supporting labour productivity, in particular for older workers.

The assumptions in the AWG risk scenario (presented above) have a sizeable effect on health care and long-term care expenditure. The projected increase in total age-related expenditure would be 3 pps. ​of GDP higher than the baseline scenario up to 2070 for both the EU as a whole, and 2.7 pps. of GDP at the EA aggregate level. It would entail an increase over the entire projection horizon of 4.9 pps. in the EU and of 4.4 pps. in the EA (see Graph 8 and Table 3).

However, in both risk scenarios, the EU/EA aggregates mask considerable variety and the expenditure projections are very different across Member States. Assuming a slower TFP growth leads to more adverse projected trends over the long-term in most countries, but not all, reflecting differences in pension benefits’ indexation rules (see Graph 9 and Table 2). Under the AWG risk scenario, all countries but Greece would experience an increase of ageing costs by 2070 (see Graph 9). Particularly large increases are projected for SK, SI, LU, MT and RO (with a projected rise by around 10 pps. of GDP or more), reflecting the effect of convergence drivers in these countries (see Graph 9 and Table 3). 

​Slightly higher projected increase in age-related spending projections compared with the 2018 Ageing Report

The increase in the age-related public expenditure is generally higher than what was projected in the 2018 Ageing Report. Under the baseline scenario, the rise in total costs of ageing (19) by 2070 will be higher in the EU, by 0.4 pp. of GDP, than projected for the same period in the 2018 Ageing Report. Exceptions are BG, DE, EE, EL, ES, IT, LU, AT, PT and RO. However, in 2019, the starting year of the current projections, age-related expenditure turned out to be slightly lower than what projected in the 2018 Ageing Report in the EU (-0.3 pps. of GDP). The higher projected increase is mainly due to larger rises in pension expenditure over the long-term (see Graph 10 and Table 4), and also to health-care expenditure. These results reflect a more pronounced population ageing effect in the EU up to 2070 according to the latest Eurostat population projection, but also the impact of recently adopted pension measures in some countries (e.g. SI, HU, NL and LT), often repealing or postponing previous legislated measures, which has led to higher projected pension expenditure increases.

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(1) They will also feed into the Recovery and Resilience Facility, notably to inform the assessment of the Recovery and Resilience Plans submitted by Member States. The Facility is the centrepiece of NextGenerationEU, a temporary recovery instrument that allows the Commission to raise funds to help repair the immediate economic and social damage brought about by the coronavirus pandemic. The Facility is also closely aligned with the Commission’s priorities to ensuring in the long-term a sustainable and inclusive recovery that promotes the green and digital transitions.

(2) Population projections are based on EUROPOP2019 (Eurostat demographic projections with base year 2019). GDP growth projections are based on the EPC's Output Gap Working Group (OGWG) T+10 projections over the medium-term as of the Commission spring 2020 forecast (based on EUROPOP2018 with base year 2018, the latest one available at the time). These projections do not take into account the impact of the COVID-19 pandemic (the EUROPOP2019 projections were finalised by Eurostat in April 2020).

(3) In addition to all EU Member States, the report includes projections for Norway.

(4) See European Commission (DG ECFIN) and Economic Policy Committee (AWG) (2020) "2021 Ageing Report: Underlying assumptions and projection methodologies", European Commission, European Economy, Institutional papers, No. 142, November.

(5) From this round onwards, the EPC decided not to include the unemployment benefit projections, which were already considered as not strictly age related expenditures items in the past.

(6) In order to ensure high quality and comparability of the pension projection results, an in-depth peer review was carried out by the AWG and by the Commission services in several meetings during September-December 2020. The projections incorporate pension legislation in place at that time. No further reform measures after 31 December 2020 have been incorporated in this report.

(7) Eurostat’s models to project immigration and emigration ensure intra-EU flow consistency and are built around three modules. For 2019, they use a nowcast component based on the latest empirical evidence. For the medium-term, they extrapolate trends observed in recent years. Finally, the long-term projections use a partial convergence module. Moreover, for all years in which the population aged 15-64 is projected to shrink, a ‘feedback’ correction factor triggers additional non-EU immigration amounting to 10% of the projected decline in the working-age population (see Part I Chapter 1). 

(8) NAWRU stands for ‘non-accelerating wage rate of unemployment’. For countries with a high estimated NAWRU, it is assumed that structural unemployment will fall further to reach the EU median.

(9) Given that these projections take as a starting point the Commission 2020 spring forecast, they do not incorporate the positive impact that the EU recovery package, in particular the Recovery and Resilience Facility, will have on the economy in the medium to long term.

(10) In this report, and differently from previous editions, changes in unemployment benefits, linked to the evolution of unemployment, are not included in the costs of ageing. 

(11) These pension projections are made on the basis of current pension policies under the ‘no policy change’ assumption. If pensions were to be perceived as 'too low' in the future, policy changes could occur (through measures increasing pension expenditure i.e. via higher indexation or changes to eligibility requirements).

(12) In addition, even when this is not the case, in the projections for minimum pensions it is assumed that they are indexed to wages after ten years at the most, so as to retain the principle of those pension schemes to provide a minimum income also in the future.

(13) Minimum pension projections are available for all but seven Member States (CZ, DE, HR, LU, NL, PL and SI).

(14) Private pension projections are available for ten Member States (DK, EE, ES, HR, LV, LT, NL, PT, RO and SE).

(15) The results of the two additional COVID-19 related scenarios are also presented in the report for each expenditure item.

(16) With an impact on the projections for pensions, health care and long-term care.

(17) With an impact on the projections for health care and long-term care. In this scenario, it is also assumed, as in the baseline, that half of the future gains in life expectancy are spent in good health. This considerably mitigates the demographic effects of ageing and can be only achieved if health systems contribute to healthy ageing, mostly through health promotion and prevention.

(18) In comparison to the baseline, this scenario thus captures the impact of additional cost of the increase in the demand for LTC as living standards increase.

(19) Excluding unemployment benefits. In the 2018 Ageing Report, unemployment benefits contributed to decrease the total cost of ageing by 0.1 pps in the EU and EA over the period 2019-70.