EC Green Paper on pensions draws mixed reactions from industry
EUROPE - The European Commission has called for public consultation on how the EU can best support national efforts to ensure an "adequate, sustainable and safe" pension system.
Presenting the Green Paper today, László Andor, EU Commissioner for Employment, Social Affairs and Inclusion, said the current number of retired people in Europe, compared with those financing their pensions, was set to double by 2060.
This, he said, was "simply not sustainable".
"In addressing this challenge, the balance between time spent in work and in retirement needs to be looked at carefully," he added.
"The choice we face is poorer pensioners, higher pension contributions or more people working more and longer."
The Commission's Green Paper on pensions aims to address the following issues:Ensuring adequate incomes in retirement and making sure pension systems are sustainable in the long term Achieving the right balance between work and retirement Removing obstacles to people who work in different EU countries Making pensions safer in the wake of the recent economic crisis Making sure pensions are more transparent so people can take informed decisions about their own retirement income
The Commission has invited all interested parties to respond to the Green Paper by 15 November.
However, reactions from the industry have been mixed.
The European Federation for Retirement Provision (EFRP), which represents national associations of pension funds and similar institutions for workplace pension provision, gave the paper a "thumbs up".
Angel Martinez-Aldama, chairman of the EFRP, welcomed the fact the Commission was consulting on the pension systems of all EU member states.
Chris Verhaegen, secretary general at the EFRP, said the Green Paper presented the opportunity to come to grips with the existing diversity of workplace pension provision in the EU, adding that any legislative initiatives should "only be started after the Commission has drawn its conclusions".
Paul Kelly, senior international consultant at Towers Watson, said the paper held "significant promise" in the development of cross-border pension schemes.
"While much attention of the consultation paper will be focused on calls to increase state pension ages and the development of a Solvency-II-based regime for pension funds, the paper also marks an important step forward for cross-border pension schemes."
He added: "The Green Paper's suggested improvements to the Pensions Directive have the potential to significantly improve the European pension landscape, and the EC's review is a welcome catalyst."
Joanne Segars, chief executive of the UK National Association of Pension Funds, also welcomed the paper.
But she added that, in light of Europe's "patchwork of very different pension arrangements", a "one-size-fits-all approach" would not work.
"The EU's suggestion of applying the funding model used for the insurance industry to pensions would be inappropriate and could cause serious problems," she said.
"And unlike insurance companies, UK pension schemes have access to the ongoing support of the employer and, if that fails, the Pension Protection Fund."
Jane Beverley, principal and head of research at Punter Southall, welcomed the scope of the paper, but said it presented mixed messages, particularly on solvency.
"The Commission sees Solvency II as potentially a 'good starting point' for developing a pensions solvency regime.
"The paper asks simply what an equivalent solvency regime for pension funds would look like and does not ask the question that surely should come first - whether a solvency regime is required at all for pensions.
"Pensions and insurance are fundamentally different, and the adoption of an insurance-type funding regime for pensions would have seriously damaging effects - on schemes, the employers that sponsor those schemes, members and also the wider economy."
Robin Blackburn, a sociologist at Essex University, added that any increase in retirement ages would ineffective if they did not coincide with an increase in the number of jobs available.
"This means that, as long as general employment conditions are worsening, all this policy is going to do is share out the misery," he said.