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All-embracing reforms

Following the launch of his green paper on ageing, commissioner Spidla told reporters on 18 March that Europe’s falling birth rate and longer life expectancy is not just about older working populations and pension reform, but affects “almost every aspect of our lives”.
Pension reform is not explicitly dealt with in the paper, but organisations such as the European Federation for Retirement Provision (EFRP) are studying a number of questions that it throws up very carefully.
Chris Verhaegen, secretary general of the EFRP, suggested two points of particular interest: what the expression of “solidarity” with the very old (over 80) might mean for sustainability of pensions, and how changes to the statutory retirement age will affect retirement
provision.
At their 4th annual conference, Eurofi, which looks at banking and finance in Europe, came out in favour of defining a basic set of pan-European pension rules, which would be simple enough to allow maximum room for creativity by financial institutions while also ensuring adequate protection for consumers.
This is the guiding principal behind the so-called ‘26th regime’ approach to financial services, which the European Financial Services Roundtable also endorsed in a report issued last September.
Eurofi believes that having “simple but adequate” pension rules is the best and fastest way to ensure European integration of the pensions market, making it possible to “generate strong marketplace momentum by lessening the difficulties involved in reaching political agreements”. The idea is to focus on the rules for creating European products, without impinging on domestic legislation for similar
services.
Eurofi says that it has already carried out a study to verify the legal feasibility of such a system, indicating that “at a time when retirement savings in Europe are subject to a wide variety of regulations and different policy approaches, financial institutions are expressing interest in straightforward products that allow them to demonstrate their skills at differentiation”.
Eurofi said that now is the time to work to promote common understanding and acceptance of this approach and its benefits, adding that participants should initially be given the greatest possible degree of freedom.
Eurofi is calling on the European Commission to set up a small group of a group of advisers to look at a 26th regime for devising retirement savings products.
Internal market commissioner Charlie McCreevy said at the conference that the idea “deserved consideration” but had not yet made up his mind about it. “It’s an approach that might surmount some of the problems arising from the harmonisation of domestic laws,” he said.

Dutch MEP Ieke van den Burg, who is reviewing EU financial integration on behalf of the Parliament, also likes the idea of a 26th regime, and wants the Commission to carry out a study into its feasibility. In her report, soon to be voted on by MEPs, she says: “There is substantial demand from certain groups of internationally mobile customers…for financial service products with which they are
familiar.”
The constant bickering between finance ministers over the stability and growth, which specifies strict limits about how much debt Euro-zone countries can build up, has finally yielded results.
On the evening of 22 March, EU leaders agreed to rubber-stamp proposals that will allow Euro-zone countries to write off, over the next five years, the cost of reforming their pension systems against the public deficit, which the stability pact says should not exceed 3%.
Starting from 2004, the full cost of reform can be written off, with 20% less for every subsequent year.
Analysts suggest that this is likely to make euro entry for some of the newer member states where costs of pension reform are particularly high - such as Poland and Hungary - more manageable.
Italy, which spends proportionally more than any other Euro-zone country on pensions, will also no doubt be pleased with the agreement.

Dutch Prime Minister Jan Peter Balkenende attended the formal opening of pensions research institute Netspar, located in the Netherlands. (See report in IPE Netherlands supplement). Netspar will have a broad research remit looking at European-level issues among others, covering micro issues (such as savings and investment decisions of individuals), meso issues (such as risk management of funds and insurers) and macro issues (such as the economic impact of fluctuations in pension premiums).

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