EU expects drastic, urgent measures

Retirement age in EU member states could rise to 67 years by 2040 and to 70 by 2060 to compensate for fewer workers contributing to pension earners.

The recommendation is contained in a Green Paper just issued by the EU to start a debate on the drastic, urgent measures member states have to take to tackle the pensions' time-bomb.

The Green Paper - the first stage of consultation before formal proposals - warns that the present situation is becoming unsustainable. In the EU, there are four people of working age for every person over 65 but this ratio is expected to drop to just two for every pensioner by 2060 unless systems are overhauled.

Although no countries are mentioned by name in the document, sources close to the European Commission said Malta was one of the member states in the EU Executive's radar because the island had a problem with the long-term sustainability of its pension system, which was not deemed adequate for future needs.

"The EU has been warning Malta on this issue for the past years and has made it clear the island has to continue with its pensions' reform if it wants to guarantee current workers will have a decent package when they retire," the sources said.

Officially, the EU has no real mandate to introduce any pension reforms as this is in the hands of member states but the exercise started on Wednesday is aimed to "stimulate" and "help" the countries make the necessary reform.

"Unless people, as they live longer, also stay longer in employment, or start contributing to their pension earlier on in their working life, pension adequacy is either likely to suffer or an unsustainable rise in pension expenditure will occur," the Commission's report states.

Malta has already introduced a system where the pensionable retirement age will gradually increase to 63 years by 2020 and continue to rise to 65 years afterwards.

"The choice we face is poorer pensioners, higher pension contributions or more people working more and longer," EU Employment and Social Affairs Commissioner Laszlo Andor said in Brussels.

The Commission wants member states to say how the EU can best support them to seek a balance between work and retirement, taking account of structural changes in European societies, labour markets and rising life expectancy.

The Green Paper also tackles concerns regarding the removal of obstacles to mobility of workers as well as capital, resulting from pension arrangements, including supplementary pension schemes.

The Ministry of Education, Employment and the Family yesterday acknowledged the importance of the Green Paper and positively noting that it realised that there was no one-size-fits-all solution.

It said talks were under way regarding the possible introduction of further mandatory or voluntary funded pension schemes.

The ministry considered the debate on reforming social security and pensions should be done in total respect of the principle of subsidiarity.

While the ministry was not against strengthening the policy coordination framework at EU level in the area of pensions, this should not prejudice member states' competence in determining pension policies at national level.

The government will be providing feedback to the Commission during the consultation period and urged all stakeholders, social partners and NGOs to provide their views and valuable practical experiences.

The Commission's online questionnaire on the Green Paper is available at http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=pensions

The deadline for the submission of feedback is November 15.