PensionsEurope: "no policy change" scenario is not an option to deal with pension inequalities and challenges of changing working life

7 June 2018 — Daniela GHETU
Today, at PensionsEurope Conference 2018, Ms. Ana Carla Pereira, Head of Unit for Modernisation of Social Protection Systems at the European Commission, presented the main findings of the 2018 Pension Adequacy Report (2018 PAR) and 2018 Ageing Report (2018 AR).

PensionsEurope praises the efforts of DG Employment and of the Social Protection Committee (SPC) to jointly promote the findings of these reports. In our view, sustainability and adequacy of pensions are two sides of the same coin that requires a holistic approach reflecting the social and economic aspects of pensions.

The findings of these reports provide Member States with reliable and up-to-date information and forward-looking projections on pensions, thus being of valuable support to their decisions when designing or reforming pension systems.

The reports show that there is room and need for improvements.

Today, at EU level, around 17.3 million (18.2 %) of those aged 65 and over are at risk of poverty or social exclusion, the gender gap in pensions is around 37.2 percent for the pensioners aged 65-79, and some categories of workers, such as self-employed and people in atypical forms of works, are more at risk of suffering of inadequate retirement income. However, we also note that there are large differences between countries.

For many Member States the "no policy change" scenario is not an option. In the future, the projected demographic and economic trends, structural changes in the labour market, shrinking workforce, changing lifestyles and working relations will require governments to further reforming their systems. Without changes, they will not be able to deliver adequate retirement incomes and to allow older people to enjoy a decent living standard and economic independence, while maintaining the long-term sustainability of the systems.

The data reported by the 2018 PAR and the 2018 AR testify that supplementary pension schemes can contribute to a more adequate income protection and support, thus preventing poverty in old age and maintaining retirees' standard of living in European Member States. A multi-pillar pension system that includes both PAYG and funded arrangements is better able to achieve its various objectives and more resilient to the multiple risks to old-age financial security. Basing the pension income on a multi-pillar pension system allows for relieving the burden on public pension systems and help to increase pension adequacy in all Member States.

Considering that public pension will deliver lower outcomes to the EU citizens in the years to come, it is important that Member States will increase the coverage and provide for an adequate level of contribution to supplementary pensions. We call on the EU Member States to facilitate access to high-quality, safe and cost-effective supplementary retirement saving pensions.

We agree with the Commission that the ability of pension systems to cover different types of economic activity will have a significant bearing on the future adequacy of old-age incomes. It will be key for Member States to identify and remove the barriers that obstacle the equitable access to public and private pensions, and to leave freedom to Member States in deciding how to provide for coverage, as they are best placed to take decisions on whether these workers should be covered by public or private pension provisions, on whether there should be some kind of compulsion (e.g. auto-enrolment, mandatory coverage), and on the provision of additional tax and financial incentives.

These tools are being used in very different ways across the EU, so we see a considerable scope for mutual learning. This requires coordinated efforts and an integrated approach aimed at providing a comprehensive and holistic view that comprise both adequacy and sustainability and includes all the three pillar of pension provision. With this aim, we welcome that the European Commission is establishing a High-Level Group of Experts on pensions, and we will provide useful inputs to this work.

Matti LEPPALA, Secretary General/CEO of PensionsEurope said:

These reports show that there are relevant inequalities across the EU. Many people are at risk of poverty or social exclusion and some specific groups are more at risk of inadequate pensions. Even though identical careers for men and women would lead to similar pensions, the gender gap in pensions is still high and the PAR states that it will persist in the future. Moreover, labour markets are changing fast, and this is having adverse consequences on pensions. We need to tackle the reasons behind inequalities and innovate for new pension solutions".

Janwillem BOUMA, Chair of PensionsEurope said:

We very much appreciate that the 2018 report is specifically dwelling on how supplementary savings, and in particular workplace pensions, contribute to old-age incomes in different Member States. PensionsEurope strongly believes that the most important measure to achieve adequate and sustainable pensions is to encourage and facilitate supplementary retirement savings.

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