At the same time, an increase in life expectancy for each cohort will reduce the annual pension. This motivates the individual to remain in employment and to ensure that the system is sustainable. The National Insurance Scheme’s expenditure is financed directly over the central government budget. Decisions about national insurance benefits have a substantial influence on future taxpayers. These costs are not transparent when the budget is decided. Developments since 1967 show that such a pay-as-you-go system is not robust. Benefits change over time and costs can easily be pushed into the future. The alternative is a system where pension expenditure is covered by accumulated capital, i.e. a funded system. In a funded system, a decision to increase pensions or reduce the age of retirement will require the allocation of capital today to cover future expenditure. Such a fund provides a measure of the cost of increasing pension expenditure. Our pension system is complicated. In addition to the National Insurance Scheme, many other operators, including the central government, have established additional pension schemes. There are different rules for coordination and entitlement. Any shift to a fund-based system for the National Insurance Scheme will probably require transitional rules for many years ahead. However, I believe that it will be possible to find solutions to these practical problems. Distributional and practical considerations imply that minimum benefits in the pension scheme cannot depend on earlier employment, but should apply to everyone.
Your thoughts and comments will reflect the unique valueadded of the ESRB: to bring policymakers together to exchange expertise and coordinate policy action, with the common aim of reducing the risk of financial crisis. On that note, I am pleased to open this first annual conference of the European Systemic Risk Board. 1 Pagano, M., S. Langfield, V. Acharya, A. Boot, M. Brunnermeier, C. Buch, M. Hellwig, A. Sapir, I. van den Burg  (2014), “Is Europe overbanked?” ESRB Advisory Scientific Committee Report no.4. 2 Becker, B. and V. Ivashina (2014), “Cyclicality of credit supply: firm level evidence”, Journal of Monetary  Economics, 62: 76–93. 3 Langfield, S. and M. Pagano (2016), “Bank bias in Europe: Effects on systemic risk and growth”, Economic  Policy, 31(85): 51–106. 4 Levine, R., C. Lin and W. Xie (2016), “Spare tire? Stock markets, banking crises, and economic recoveries”,  Journal of Financial Economics, 120(1): 81–101. 5 European Central Bank (2015), “Report on financial structures”, October. 6 Summers, L., “US economic prospects: Secular stagnation, hysteresis, and the zero lower bound”, Business 3/4  BIS Central Banker's Speeches  Economics, 49(2). 7 For an analysis of the sensitivity of US banks’ pre-provision income over one year to changes in short-term  interest rates, see M. Gomez, A. Landier, D. Sraer and D. Thesmar (2016), “Banks’ exposure to interest rate risk and the transmission of monetary policy”, ESRB Working Paper no.13. 8 Cœuré, B.