The European Commission has issued a communication looking at the sustainability of pensions and how best to maintain adequate pension provision while keeping public economies in ‘good shape.’ A high level group is also working on a progress report, which should be presented to the European Council in Nice in December.
In a speech at a recent Brussels conference The Consumer and the Modernising of Social Protection in Europe, Odile Quintin, director-general of the Directorate General for Employment and Social Affairs, stresses that the viewpoint in modernising pensions should be that of the consumer. “Some people tend to forget that the main purpose of pension schemes is to provide a secure income to people in old age; they seem more interested in other issues, such as the development of equity and bond markets,” says Quintin.
Despite the visibility of the demographic problems Europe is facing, there are other issues that are going to have a major effect on pensions. By 2050 most women will be entitled to higher pension earnings than today and people hit by unemployment in the 1980s and 90s will see a decrease in their pensions, noted Quintin.
“We may think that public finances are safe if we have reformed public pension schemes in such a way that ageing does not lead to increased expenditure. But if this leads to increased poverty, then the reforms may not be sustainable from a social point of view,” she adds.
There are four main political messages in the communication. Firstly, pension reform is important but confidence in pension systems has to be retained. Secondly, sustainability cannot be achieved simply by modifying existing pension system parameters: links between sustainable pensions, employment and economic performance must be taken into account. The importance of the link between sustainable pensions and employment is also a central message.
The fourth main point of the communication is the need to ensure adequacy and fairness in pension provision.