EUROPE - The European Council has stressed the need for urgent action to enhance the long-term sustainability of pensions across Europe, following the publication of an interim joint report on pensions.
At the latest Economic and Financial Affairs meeting earlier this week, the European Council concluded the report, written by the Economic Policy Committee and Social Protection Committee, "reaffirms the commitment to the common objectives of sustainable and adequate pensions".
The interim report outlined a "three-pronged strategy" for meeting the economic and budgetary consequences of ageing by reducing debt at a faster pace, raising employment rates and productivity and reforming pension, healthcare and long-term care systems.
In particular, it noted that despite pension reforms and policy changes across many of the member states, public pension expenditure in the EU is projected to rise by 2.5 percentage points of GDP by 2060.
That is an increase of 23% on average of public pension expenditure, and "substantially more" in some member states.
The report said it would be a challenge to adapt the pension systems of some EU member states to expected demographic changes, as life expectancy is expected to increase by 8.5 years for men and 6.9 years for women over the next 50 years.
The report said: "Additional reforms of pension policy will be needed in several countries.
"Furthermore, there are signs ongoing reforms might bear considerable risks in terms of both adequacy and sustainability.
"As changes in pension systems will tend to make benefits more contingent on developments in labour and financial markets, important risks relate to employment rates not increasing enough or capital markets not delivering as expected."
Findings from the work by the two committees noted sustainability and adequacy concerns for all types of pension schemes have been aggravated by the crisis, leading to a need to review the levels of market exposure and design of risk sharing in funded pensions.
The report continued: "Variations in the ability of funded schemes to weather the present crisis show that differences in design, regulation and investment strategy matter.
"Achieving a better balance for pension savers and pension providers between risks, security and returns will be the key to enhance public confidence in funded pensions and ensure their contribution to adequacy of retirement incomes."
However, the document warned there was no single one-size-fits-all solution and suggested increased transparency and information would be essential to gain public trust and guide behaviour.
A final report is expected from the two committees by the end of the year to be presented to the ECOFIN and EPSCO Council configurations under the Belgian presidency.
The findings from the interim report also come ahead of the expected Green Paper on Pensions by the European Commission later this year.