A major pension reform is urgently required to ensure fiscal sustainability, eliminate distortions against working at older ages and deal effectively with poverty issues. First, pension expenditure is projected to increase to mid-century by more than for any other OECD country. Reform is required not only to ensure fiscal sustainability, but also because pension expenditure will otherwise account for more than one-fifth of (unrevised) GDP and inevitably crowd out other social outlays which are needed to support social cohesion and structural objectives. Judged against projections for other EU countries a fall in pension benefits relative to average wages is likely to bear the brunt of any adjustment, although the extent of this adjustment can be limited by reforms which reduce disincentives to continue work in old age and curtail the many alternative early retirement pathways.