This report details the underlying assumptions and projection methodologies to estimate the economic and budgetary impact of an ageing population over the long-term.

In 2010, the ECOFIN Council gave the Economic Policy Committee (EPC) a mandate to update its common exercise of age-related expenditure projections by the autumn of 2012 on the basis of a new population projection by Eurostat. The long-term age-related expenditure projections provide an indication of the timing and scale of changes in economic developments that could result from an ageing population in a ‘no-policy change’ scenario. The projections show where (in which countries), when, and to what extent ageing pressures will accelerate as the baby-boom generation retires and average life span in the EU continues to increase. Hence, the updated projections of age-related expenditure and the associated sustainability assessments will provide important insights on both the economic impact of ageing and the risks to the long-term sustainability of Member States’ public finances reflecting new economic environment, affected by a durable impact of the current crisis, and further reform effort by EU MS. This first report provides a description of underlying macroeconomic assumptions and projection methodologies of the age-related expenditure projections for all Member States. On the basis of these underlying assumptions and methodologies, age-related expenditures covering pensions, health care, long-term care, education and unemployment transfers will be calculated and presented to the ECOFIN Council in May 2012.