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Mr. László ANDOR EU Commissioner responsible for Employment, Social Affairs and Inclusion Progress on pension reform ALDE Public Seminar: Brussels, 10 February 2011

European Commission - SPEECH/11/90   10/02/2011

Other available languages: none

SPEECH/11/90

Mr. László ANDOR

EU Commissioner responsible for Employment, Social Affairs and Inclusion

Progress on pension reform

ALDE Public Seminar:

Brussels, 10 February 2011

Honourable Members,

Distinguished guests,

Ladies and gentlemen,

It is a great pleasure for me to speak at this ALDE conference on pension reform.

We are all sitting here today because we have a common concern: how do we make sure that European pension systems are 'fit for purpose', given the challenges that Europe will face over the coming decade? This is an issue which will affect all Europeans from across the whole of Europe.

As you know, last July, the European Commission launched the Green Paper on Pensions to kick-start the debate on what kind of adjustments to national pension systems are needed and what kind of support is needed at EU-level.

This conference is an important part of the debate to sound out new ideas and identify potential problems. And I would like to thank the organisers for their initiative in keeping up the pressure to find the right solutions to this pressing problem.

Ladies and gentlemen,

Key pension challenges

Basically we face four key challenges in relation to the future of our pension systems:

First, we need to overcome the imbalances resulting from the increasing divergence between life expectancy and retirement ages.

Since 2000, Member States have managed to raise employment rates of older workers and exit ages from the labour market. However, we still have a long way to go before we achieve the right balance. Moreover, we need to factor in longer periods in retirement as people live longer.

Second, we need to adjust the European framework to reflect the changes that have come about in national pension systems after a decade of pension reforms.

The move from largely single systems to multi-pillar systems in many Member States means that there is a much larger role for prefunded, defined-benefit, private pension schemes in future pension provision.

This means that internal market and cross-border issues will become increasingly important. As such, EU rules will need to be updated.

Third, we must draw lessons from the financial and economic crisis.

The crisis has highlighted the need to review financial market exposure and the design of our pension schemes in order improve risk mitigation and enhance the funded pensions' capacity for shock absorption. Here, I see a role for the EU in terms of improving economic governance and promoting exchange of good practice.

Furthermore, high levels of unemployment and a serious deterioration in public finances have weakened the basis for pay-as-you-go public pensions. We urgently need to undertake pension reforms to ensure future long-term sustainability and adequacy.

Fourth, we need to fully prepare our pension systems for the acceleration of population ageing.

This is no longer a distant scenario. From 2012 the working age population in Europe will begin to shrink as the 'baby boomers' reach the retirement age, coupled with low fertility levels in many Member States.

Ladies and gentlemen,

Progress in pension reform

Member States have already engaged in long-standing cooperation to learn from each others' experience and exchange good practice in pension reform. There is a consensus on the need for coordination at EU level and for establishing EU rules on cross-border issues.

For the last 10 years, coordination at EU level has underpinned Member State efforts to modernise their pension systems. And many Member States have already made good progress in adapting their pension systems to reflect demographic ageing, changes in the labour markets change and evolving gender roles.

However, most Member States have a long way to go; and few others have not even begun with pension reforms.

We should recognise that ongoing reforms carry new risks. Indeed, as reforms make future pensions far more dependent on long-term developments in labour markets and financial markets. This means that we need to create employment opportunities and increase the stability of financial systems.

Ladies and gentlemen,

Green Paper

The Green Paper on Pensions looked at three areas:

1. First, the Green Paper examines broad strategic issues, including links to Europe 2020;

2. Second, it looks at removing obstacles to mobility for workers and financial services;

3. Third, it raises the issue of achieving safer pensions.

The Green Paper resulted in more than 100 meetings and conferences with stakeholders. We received almost 1700 responses.

The consultation has encouraged and informed debates at national level, including by comparing developments that have taken place across the EU. It has also brought to light on issues which were previously seen as taboo, such as changes to retirement ages or closing off early exit routes.

Recently, Spain has reached political agreement on increasing the retirement age to 67. In Denmark, there have been proposals to abolish early retirement provisions. And in the Netherlands, there have been discussions about increasing pensionable ages.

The Green Paper has been broadly welcomed, in particular its holistic approach and we certainly succeeded in our aim of starting an EU debate about pensions.

Pension reform in European now has a higher profile than it has had for many years. We now need to build on this achievement – and this is where we will need the involvement of actors at all levels.

The Commission is currently in the final stages of analysing the results of the consultation. We have just received responses from the Committee of the Regions and the European Economic and Social Committee and are waiting for the European Parliament to adopt its final opinion. As such, it is still too early to draw any final conclusions.

However, it is clear that we need a set of clear messages from the Parliament. And I am very grateful to the ALDE group for its contributions to the EP report which, I hope, can draw support from all sides of the political spectrum.

In the meantime, the Commission will be working on a White Paper on Pensions to draw policy conclusions from the consultation.

Ladies and gentlemen,

Urgent need for action

Developments in Member States such as Greece – against the backdrop of severe austerity measures – have shown that urgent action is needed.

I know this has been difficult – sometimes even very tense – but it is clear that we need to take decisive steps to safeguard the future of pension systems.

The Annual Growth Survey, which was adopted by the Commission last month, has already outlined three areas for improvement:

- First, we suggest that pensionable ages should be linked to longer life expectancy;

- Second, we need to improve employment opportunities for older workers and prevent early exits from the labour market;

- Thirdly, we stress the importance of complementary private savings to improve income during retirement;

- And finally, we underline the need to review the Directive on the activities and supervision of institutions for occupational retirement provision (IORP Directive).

The White Paper Follow-up

Given the urgency of the situation, the Commission has already started the preparations for the White Paper.

Yesterday I met with the Commissioners' Group on pensions to discuss the responses to the Green Paper consultation as well as possible policy options on how to update and improve the European framework on pensions.

There was agreement that we should continue with the holistic approach to pension reforms, simultaneously tackling issues of adequacy, sustainability and safety.

As part of this, we need to continue our dialogue with the key stakeholders, both on possible new regulatory initiatives in such fields as portability of occupational pension schemes and insolvency protection, and other softer forms of regulation, such as codes of good practice.

Ladies and gentlemen,

Conclusion

The last 12 months have seen lively debate in the field of pension reforms. This year promises to equally intense.

I count on your support to bringing about real change to create both adequate and sustainable pensions for the future.

Thank you.


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