Financial Sustainability and the Wellbeing of the Elder Romanian Population Using Pension Modelling: A Social and Economic Impact Factor-Based Analysis

Introduction

The COVID-19 pandemic time has provoked a huge economic crisis with important impacts on population revenues, on labour market, on pension, and especially on vulnerable people, unless households had substantial savings to rely on (Bottan et al., 2021). The financial and debt crisis from 2008 and respectively from 2009 worsened the financial sustainability and position of pension funds (Kastelein & Romp, 2020). There is a vulnerable labour market, since population is ageing, life expectancy is raising, and pressures are increasing, influencing welfare states, which must sustain this category of elderly people (Hu et al., 2023). Many national and also international governmental systems have indicated that the expenditures with the pension funds will have a more rapid increasing than the income received from the contributors (Alonso-García & Rosado-Cebrian, 2021). The pension system offers support for the retired people, and its role is to attract attention on this issue, due to this more rapidly process of population ageing (Li et al., 2021). The retirement age has also suffered changes over time (Trentini, 2021). Ensuring wellbeing for elder people is becoming a real challenge for those countries with low and average revenues, but also for many developed countries who want to achieve financial sustainability (Borsch-Supan et al., 2023). The elder people are supposed to reach 2.1 billion in 2050, 1.4 billion till 2030 from 1.04 in 2020, according to United Nations statistics, and it is added that more than 80 percent are leaving in the developing countries (Smith & Wesselbaum, 2023). Building an adequate pension system was a priority for many generations and periods. There are two important risks that the public retirement EU pension system is confronting: the pay-as-you-go system continuity and the opportunity to ensure for elder population a viable standard of living (Urbano et al., 2021). According to the recommendations of the European Commission, to ensure the old-age pensions system, more countries have used different taxations and occupational pensions (Genser & Holzmann, 2021). There is a social contract signed between generations, by which active employees from present period sustain the present older generation, and in exchange the present employees are counting on the future employees (which are now at childhood period) (Banyár, 2021). Pension systems are using three types of pensions: pay-as-you-go (PAYG) (paid from the present revenues), fully funded (paid from member contributions who build a fund over the years) or partially funded pensions. The PAYG pension scheme cannot be used as higher return coexist or with private retirement schemes (Andersen et al., 2021). Pensions are regarded as a type of insurance and are used to sustain consumption at individual level. Beyond the workplace pensions, workers choose to make additional savings, but they need for financial training to manage their resources (Herrador-Alcaide et al., 2021); many people do not use a voluntary system due to inertia, myopia (Robertson-Rose, 2021), lack of time - inconsistent preferences (because it means cost and effort for the short term but benefits on the long term), self-control, financial literacy, and problems imagining the future (Eberhardt, 021). Thus, for an efficient retirement mechanism, is important to use risk sharing (J. Staveley-O’Carroll & O. Staveley-O’Carroll, 2021). So, the elder retired people are responsible for smart decisions based on investment, necessary for a happy future retirement and developing schemes belonging to future generations (Cheung et al., 2023). The research question is ”How do the social and economic factors influence pension?”.