The European Commission last February issued its White Paper For Adequate, Safe And Sustainable Pensions − a proposal for EU-wide pension reforms that provides member states with a toolkit for sustainable pension policies.
… Europe is ageing and older people will form an increasingly large part of European society- David Casa
The White Paper aims to address the challenges that arise as demographic changes and a troubled economy are putting pressure on European pensions systems.
As a result of low birth rates and longer life expectancy, the European Union has been witnessing a significant upsurge in the average age of its citizens. Since 1960, the life expectancy of Europeans has increased by eight years and it is expected to rise by another seven years over the next five decades. Meanwhile, the percentage of citizens of prime working age is expected to fall, resulting in demographic imbalances that threaten the viability of current pension policies.
Traditionally, pension policies fall into the sphere of competence of the member states. However, European integration is deepening and the effects of one state’s pension policy may transcend its national borders, with ramifications for other members of the EU. The European Union is therefore zooming in on the issue, in order to ensure a financially sustainable future and decent living standards for older citizens across the region, who occupy an increasingly important place in the demographic landscape of the community.
In addition, pension policies also play an important role when it comes to “Europe 2020” − the EU’s growth strategy for the forthcoming decade.
In the framework of this strategy, the EU has set itself a range of ambitious targets, which include increasing the employment rate to 75 per cent and lowering the number of people at risk of poverty by at least 20 million. A successful set of pension policies is inextricably linked to the achievement of these objectives.
Given the urgent need to revamp the pension systems across the European Union, the EU institutions are now gearing up for the challenges ahead.
The European Parliament has just appointed Ria Oomen-Ruijten as rapporteur in the Employment and Social Affairs Committee and is currently discussing the Commission recommendations put forward in the White Paper. The Paper, which coincides with the 2012 Year for Active Ageing and Solidarity between Generations, proposes linking the retirement age to life expectancy. It further envisages to restrict access to early retirement schemes and to put in place support schemes for those citizens who will experience longer working lives. The Commission also recommends the development of complementary retirement savings schemes, as well as erasing any gender gaps in current pension systems.
In many EU member states, pension reforms are already underway. One example is Malta, which already introduced its first set of reforms in 2006. In the course of these reforms the retirement age was raised to 65 for women and men alike.
The same is true for France, where the pension reforms under the previous government led to an increase in the retirement age from 60 to 62. However, the result of the recent presidential elections may turn the tide of France’s policy reforms.
The newly elected President, François Hollande, has indicated his intention to revoke the changes made under his predecessor by lowering the retirement age back to 60 years. This measure could bear consequences for other member states of the EU, as a lower retirement age will threaten the financial viability of the pension system in France, which is one of Europe’s leading economies.
Guaranteeing the viability of European pension systems is also of vital importance for the competitiveness of the continent in the future. Fact is that Europe is ageing and older people will form an increasingly large part of European society. Over the next 25 years, the number of European citizens above the age of 60 is expected to increase by two million each year. This threatens to make European pension schemes top-heavy, with a small workforce having to support a large number of pensioners. While the working age population is in decline in Europe, it is expected to grow significantly in other parts of the world. Europe’s workforce is the continent’s growth engine and a shrinking number of people in employment can therefore have significant repercussions for the region’s economic prosperity.
This outlook has galvanised European policy makers into action. The European institutions are now undertaking concerted efforts to respond to the changes ahead and to support member states in designing pension schemes that ensure a financially sustainable future while protecting the standard of living of people past the retirement age in the forthcoming decades.
While this presents EU member states with great challenges, this is also an opportunity to draw up young and dynamic policies that provide effective support through old age. After all, we should also be reminded that the underlying cause for these developments is actually a positive one – namely that Europeans are living longer and healthier lives.
Mr Casa is a Nationalist member of the European Parliament.