EUROPE - Officials at the European Commission's employment, social affairs and equal opportunities DG have questioned whether pension reforms introduced across Europe over recent years can in fact been successful after all and whether funded pension systems run by some member states will provide enough income at retirement.
Georg Fischer, head of the social protection and social employment unit at the DG Employment, Social Affairs and Equal Opportunities at the European Commission, told delegates at the European Pension Funds Congress yesterday while good work was being made to correct the mistakes of the past regarding pension provision, most countries have "failed" to produce pension reforms considered successful in delivering takeup and retirement income.
"Pension reforms in many countries have substantially cut the expected pensions being, according to estimates," said Fischer.
"Poland, for example, has cut the 70% [income] replacement rate[at retirement] to 50-60%. The difference is more than 15% in other countries. This has raised questions about how to raise additional income. One way is to follow the mandatory individual savings schemes. The only country in which this has been a real success has been Germany with the Rieste pension. It has spread private pensions down the income level. But it seems to me that in many countries attempts have failed," argued Fischer.
More specifically, Fischer said he was especially concerned that in the current economic climate state funded pension systems, such as those in Norway and Ireland, were struggling to produce the returns needed to meet State payout requirements, whether they actually provided an improved retirement for individuals, or whether Sweden's defined contribution system, for example, had fared any better in comparison.
"Funded pensions are run in two ways; on the one hand some member states have established reserve funds in their state systems. But they have taken a bit of a battering in this crisis even though they are long-term funds and the danger is with the decline in value [governments] may be less inclined to continue contributing," suggested Fischer.
"Mandatory contribution schemes [on the other hand] replace a substantial part of the state pension. This puts these schemes under the spotlight given what is happening in the financial markets. But you have the cost of double paying for those who are paying in[to schemes] and those who are already retired. Until now it was relatively easy to finance these transition costs but over time these may not be as easy," he continued.
He noted one of the biggest battles many countries still face is in persuading people to work up to the State retirement age as only Germany appears to be on track to meet current EU requirements on the number of people working beyond the age of 55.
"The average exit year [from employment] has risen from 59-61, though this is quite far from what it should be; and the 55-64 employment age has gone up but still under the 50% Lisbon agreement by 2010 member states must reach. Germany has reached and surpassed the 50% mark and will surpass 55% by 2015