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 policies.”
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 provisions.
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 expectations.”
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 reform.
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 altogether.
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.