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Leaked White Paper reveals European Commission's plans for pensions

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  • Leaked White Paper reveals European Commission's plans for pensions

EUROPE - The European Commission will encourage member states to implement wide-ranging pension reforms by providing financial support and seek to extend the working life of employees by urging the abolition of mandatory retirement ages, a leaked draft of the White Paper on Pensions has revealed.

In the draft of the report obtained by IPE, the follow-up from last July's Green Paper, the Commission said that any member states and social partners wishing to receive expertise from other countries or international organisations would receive financial support from 2012 for the implementation of pension reforms and new retirement policies.

The draft says: "The primary responsibility for the design of their pension systems remains with the member states. This White Paper respects the responsibilities of the member states and proposes different types of initiatives, ranging from legislation over financial incentive to policy coordination and monitoring in an integrated and comprehensive way."

The Commission insists on the need to support later retirement age and will present a recommendation in early 2013 to restrict access to early retirement schemes by abolishing mandatory retirement ages.

It adds: "To ensure that the pension reforms will produce the expected benefits in terms of financial sustainability and adequacy, member states will need to enhance people's ability to work longer through a set of work place and employment measures."

Among the measures proposed, the Commission recommends eliminating mandatory retirement ages, promoting healthy ageing at work, providing access to life-long learning, adapting work places to the requirements of older workers and developing opportunities for extended working lives.

As a result, pension reforms already in place will see lower replacement rates from public schemes, while complementary retirement savings will be expected to play a more important role.

Speaking at the EIOPA conference in Frankfurt, Bernhard Wiesner - senior vice-president of corporate pensions at Bosch Group and representative of EIOPA's Occupational Pensions Stockholder Group - said occupational pensions should be aside of first-pillar concepts the clear mainstream to accumulate capital for retirement, as some member states can no longer afford to support less efficient options for workers.

Karel van Hulle, head of internal markets and services at the Commission, added: "It is important member states take the responsibility of occupational pension towards citizens, and the first pillar should therefore answer people's needs."

However, member states will have to find ways of improving access to complementary retirement instruments "by extending the coverage of cost-effective and safe supplementary pension schemes", the Commission concedes in the White Paper.

Regarding the second pillar, the Commission will develop a code of good practice for occupational pension schemes, addressing issues such as the payout phase, risk-sharing and mitigation, cost-effectiveness, shock absorption and ways of avoiding pro-cyclicality in investments.

At a press conference, Gabriel Bernardino, chairman at EIOPA, said: "We need to have a constant look at the different risks arising, and pro-cyclical behaviours coming from several asset classes are an important risk to take.

"The contra-cyclical rule is therefore appropriate and will need to be used as a tool in crisis times."

As for the third pillar, the Commission is also planning to improve the quality of the system and the protection and information of consumers via voluntary codes and possibly a EU certification schemes for third-pillar products.

Moving to cross-border activity, the Commission insists on the need to develop such systems with the review of the IORP directive - IORP2 - expected for 2012.

One of the main issues, according to the Commission and pension providers, remains tax obstacles to cross-border mobility and cross-border investments. In the White Paper, the Commission argues that it will be its priority to tackle these issues to better develop cross-border activity in Europe.

The Commission plans to publish a report on progress towards "adequate, sustainable and safe pensions in Europe" in 2014.

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