Too open and too loose?

An argument between Age, the
older people’s platform, and
the European Commission is
simmering over how effective the
EU’s peer review system is, just as the
EU’s executive body gets ready to
publish a series of non-binding suggestions
for how member states can
step up pension reforms.
Following the submission to the
Commission over the summer of the
25 national strategy reports on pension
reform, Age delivered a statement
in November that questioned
the effectiveness of the open method
of co-ordination (OMC).
The statement said that member
states should be obliged to “set out a
real strategy to meet the objectives,
which can be measured by good statistics
and reliable indicators”. Age
also called for the Commission to
assume the role of “an independent
outside evaluator” able to give “recommendations”
to member states
about areas where they under-perform.
At the moment, the OMC serves as
a loose exchange of ideas between
national pension bodies, with the
Commission asking member states
every few years to report back on
progress of pension reforms so that it
can compile a synthesis report of how
things are developing across Europe.
Michel Riquier, who chairs the
social protection expert group at
Age, told a recent seminar: “To
achieve convergence of common
objectives through the OMC, we
need more and better indicators to
be able to really compare pension
But those in the Commission argue
that there is no appetite among governments
to turn the OMC into
something with more teeth. One
senior official said: “You have to be
careful when doing anything that
could be seen as interfering with
national social systems.” Geert de
Cock, policy adviser at Age, disagrees.
He says that a growing number of
member states are keen for the Commission
to provide clearer guidance
about where their pension reform
should be heading.
The Commission’s synthesis report
on pension reform in the EU is due
to be published in February. It will
highlight those regions of Europe
where there is particular cause for
concern. For example, one senior
official says, the report will call the
UK to task over its failure to properly
address the exclusion of so many
poor people from adequate pension
The UK initiative to teach people
how to save more for their retirement
- the so-called “informed
choice” campaign - was well
received by the Commission, following
a conference held in Brussels
in November.
At the conference, Stephen Timms,
UK minister for pension reform,
said: “We must help people plan
actively for their retirement. Financial
education and information are
important for setting realistic retirement
Jérôme Vignon, head of the social
protection unit in the Commission,
told the conference that he supported
the informed choice initiative,
and emphasised that it would
play a key role in the further development
of the OMC on pension
But he cautioned that on its own
educating citizens was not enough to
deal with the demographic crisis now
facing Europe. “It is important to
encourage people to save for their
retirement, but let us not forget that
many poorer citizens simply do not
have the same options available to
them,” he said.
He added that the informed choice
strategy would have to go hand in
hand with other measures to bring
those excluded at the moment from
pension options into the circle. He
pointed to the recently-published
Turner report in Britain as having
some sensible recommendations in
this respect.
The Commission has finally
moved to take a proper look at
the effect that reforming the
solvency rules for Europe’s insurance
companies might have on occupational
pension funds, with a number
of key actors calling for pensions
to be exempted from the legislation
The issue is provisionally scheduled
to be debated on 5 April next year by
the European Insurance and Occupational
Pensions Committee, an
expert group chaired by the Commission,
but it is unclear at the
moment which direction the debate
will head.
At issue is a particular clause of the
so-called IORP directive that says
the minimum level of assets for pension
funds should be set according to
the EU’s solvency requirements for
life assurance. This means that any
tweaking of these rules will also have
an effect on how occupational pension
funds are regulated – unless
steps are taken now to include one or
two exemptions.
Solvency II is very much in the early
stages of its development, with a legislative
proposal unlikely before mid-
2007, so it is uncertain how big an
impact a new solvency regime might
have on pensions. But there are a
growing number of voices that fear it
could be worryingly big.
Anne Maher, chief executive of Ireland’s
Pensions Board, is one of that
number. Speaking at the first online
IPE E-symposium on 23 November,
she said applying Solvency II to
pension funds could be very destructive
for the industry. “I have strong
views that that’s not the way forward,”
she said.

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