EUROPE – The European Commission says the right policy response to increasing life expectancy may be flexible retirement ages.

“Longer life expectancy may pave the way for a possible expansion of the share of life spent in retirement. However, retirement decisions also need to be economically and financially viable,” said Klaus Regling, director general of the Commission’s Directorate General of Economic and Financial Affairs.

“Flexible retirement ages adapting to a continuously increasing life expectancy may be the appropriate policy response,” he said in the introduction to the latest Quarterly Report on the Euro Area.

Regling added that EU policies promoted by the Lisbon Strategy were contributing to rising employment rates by curtailing early retirement schemes, raising retirement ages and strengthening the incentives to delay retirement.

The report went on to say that pension funds shifting their investments into longer-term bond portfolios due to population ageing was one of a number of global factors behind the current low long-term interest rates.

It said that “rising asset liability matching in retirement pension products is generating a strong demand for long-range investments with yield levels that are perceived as secure”.

“This demand for increasingly longer-term obligations is evident in the favourable reception given to the fifty-year maturity bonds recently issued by France and the United

Elsewhere, the Bank of England’s rate-setting committee has taken the impact of pension fund regulation on interest rates.

The minutes of the most recent Monetary Policy Committee meeting, released today, stated: “In the United Kingdom, it was possible that the low level of long rates partly reflected pension fund regulation.”