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Brussels warns Germany over impact of state pension changes on second pillar

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The European Commission has warned Germany it must consider the potentially detrimental impact of state pension reforms to the development of occupational pensions in the country.

Releasing country-specific recommendations for reform, the Commission also called on the Netherlands to consider the intra and inter-generational fairness of its second-pillar reforms and urged Malta to address concerns that its retirement age remained “disconnected” from longevity increases.

Current Commission president José Manuel Barroso noted that 19 EU member states had seen the rising cost of old-age care and pensions highlighted as a matter of concern.

The papers, drafted for every member state except bailout recipients Greece and Cyprus, argued that proposals by the current German coalition government to allow for retirement at 63 would put “additional strain” on the sustainability of the country’s state pension system.

“The reform could also have a negative impact on take-up of complementary second and third-pillar pensions,” the report added.

The changes will also offer a supplementary payment to mothers of children born before 1992 and have been championed by both sides of the grand coalition.

Günther Oettinger, currently Germany’s European commissioner in charge of energy, has previously argued the country should instead be preparing for a retirement age of 70.

The Commission was more complimentary in its views of the Dutch system, noting that sustainability had been improved through an ongoing gradual increase in the retirement age to 67.

It also acknowledged “comprehensive” reforms currently underway to the second-pillar system, a reference to the much-delayed overhaul of the financial assessment framework (FTK).

However, the European executive warned the Dutch government that it must ensure the changes to the second pillar offer “appropriate intra and inter-generational distribution of costs and risks”.

Looking at the EU’s smallest member state, the Commission said it could so far see “little progress” on pension reform in Malta.

“While a Pensions Strategy Group has been set up to assess all options for reforming the pension system, the Maltese authorities have given a commitment not to raise the statutory retirement age beyond the increases outlined in the 2006 pension reform,” the report said.

“The statutory retirement age therefore remains disconnected from life expectancy, which poses a problem for the long-term sustainability and adequacy of pensions.”

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