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Safe and sustainable pensions: supporting national strategies through a European approach
The Commission invites the Council to endorse a series of objectives and working methods with a view to guaranteeing safe and sustainable pensions in EU Member States. This policy paper proposes formalising and strengthening cooperation between Member States in relation to pension systems in view of their ageing populations.
Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee - Supporting national strategies for safe and sustainable pensions through an integrated approach [COM(2001) 362 final – Not published in the Official Journal].
The European Commission is proposing a whole series of common objectives to adapt pension systems to the main trends in society, namely population ageing, continued low fertility rates and increases in life expectancy.
In the light of these challenges, the Commission believes it necessary to use the open method of coordination (OMC) to set common objectives and translate them into national policy strategies. The OMC has a number of advantages, such as promoting exchanges of experience based on good practice.
Adequacy of pensions
Pension systems should take account of the risks of poverty and social exclusion among older people. They should ensure a decent standard of living during retirement and provide access for all individuals to appropriate pension arrangements.
Through the combination of the three pillars (statutory social security, occupational pension schemes and personal pension schemes), pension systems should offer each individual the opportunity to maintain, as far as reasonable, their standard of living after retirement or in the event of permanent incapacity.
Financial sustainability of public and private pension schemes
The Commission believes that Member States should pursue their efforts in the framework of the European employment strategy so as to strike an even balance between the number of active and retired persons. In the years to come, employment participation should rise, through longer labour market participation in particular, in order to guarantee the funding of pensions in an ageing society.
The Commission believes that the use of early retirement schemes should be limited and workers encouraged to stay in the labour market beyond the standard retirement age.
In addition, to ensure the sustainability of public finances, the Commission believes that public spending on pensions should be maintained at a level (in terms of percentage of GDP) that is compatible with the Stability and Growth Pact. Sound management of public finances and the reduction of public debt will considerably ease the constraints on public finances.
The Commission also believes that pension systems should be able to rely on the contribution of second and third pillar schemes (occupational and personal pension schemes). An appropriate regulatory framework at Member State and EU level is therefore needed.
Modernising pension systems
Pension systems fail to cater well for the needs of increasing numbers of people, considering in particular new family patterns, the changing roles of men and women in households and on the labour market, etc.
Pension systems should be modernised to take account of changes in society and to make sure that they cater well for the needs of a more mobile and flexible workforce. I.e., non-standard employment forms do not result in undue losses of pension entitlements and self-employment is not discouraged by pension systems.
Towards a comprehensive approach
Progress towards the objectives presented above should be measured using appropriate indicators. They should aim at providing comparable information on the major economic, financial and demographic trends affecting the sustainability of pensions. The list of commonly agreed indicators should make it possible to measure trends and policy developments.
The future of pension systems depends on policies in different areas including employment, public finances and social protection. As a result, comprehensive and integrated policy strategies are required that include these areas. It is also necessary to ensure that these policies are consistent and complementary.
This communication is the Commission’s second policy paper on pension systems and follows on from the communication “The Future Evolution of Social Protection from a Long-Term Point of View: Safe and Sustainable Pensions". The strategy it sets out is based on that adopted at the Stockholm European Council on 23 and 24 March 2001.