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European Commission

László ANDOR

European Commissioner responsible for Employment, Social Affairs and Inclusion

Sustainable Pensions for Europe - the need for action

European Forum for Manufacturing /

Brussels, 19 September 2012

Honourable Members of the European Parliament,

Ladies and Gentlemen,

First of all, I would like to thank you for dedicating this European Forum for Manufacturing to the topic of pension sustainability, and for this opportunity to present the Commission's perspective on where we stand.

As you will know, the Commission published the White Paper "An Agenda for Adequate, Safe and Sustainable Pensions" on the 16th of February this year. The paper seeks to support Member States and maximise the added value of the EU in tackling the common challenges that our pension systems face. Against the backdrop of ageing societies and economic challenges, we must ensure that pensions continue to fulfil their raison d'être – to provide adequate income for retired citizens.

The White Paper proposes to focus our joint efforts in two main directions:

1) enabling and encouraging people to work longer to earn higher pensions

2) promoting supplementary retirement savings, including occupational and private pensions.

To achieve these goals, the White Paper puts forward 20 concrete measures. In the spirit of the European social agenda, most of them rely on cooperation, partnership and sharing of best practices, while several important legislative initiatives are also in the pipeline.

Seven months after the White Paper's publication, we are on the right track. Today, I would like to look at some examples of what has already been delivered, and at the important tasks still ahead of us.

In May, the Commission presented the first Pensions Adequacy Report. Inter alia, the report clearly illustrates the increasing reliance of all Member States on occupational pensions in retirement provision.

Many adopted national reforms will bring lower statutory pensions in the future, to ensure that public pensions remain affordable as life expectancy increases and the balance between workers and pensioners deteriorates. This leaves more scope for supplementary pension provision, and some countries are providing strong encouragements for private pensions.

However, the calculations presented in the Pensions Adequacy Report also show that postponing one’s retirement also represents an opportunity to compensate for the decline in statutory pension levels. Adequate pensions in the future will depend on a mix of working longer and saving more for one’s retirement through second and third pillar schemes.

In May, the Commission also published the Ageing Report, assessing the economic and budgetary impact of ageing. While the cost of ageing is expected to be substantial, the report shows it is more moderate for countries which have taken timely steps to reform their pension systems.

The White Paper is closely linked to the Europe 2020 strategy in which pension reforms have been prominent. This is not surprising, given the impact of pensions on public finances, employment rates. But there is also a link with the poverty target, as we see that in some Member States poverty among pensioners becomes an increasing concern.

In the framework of the 2012 European Semester, the annual exercise on economic policy coordination, 17 Member States received Country-Specific Recommendations on pensions, mostly on ensuring that people remain longer on the labour market. Four Member States were specifically called upon to encourage supplementary savings within their national pension systems.

These Recommendations acknowledge the Member States' responsibility to modernise and reform their pension systems. However, beyond providing recommendations supporting general pension reform, the EU also has some specific responsibilities. One of the key initiatives that my services are currently working on, in close cooperation with the Cyprus presidency, is the so-called Portability Directive.

Statutory pension rights of people using their right to free movement in the EU have been well protected nearly since the beginning of the EEC thanks to EU-wide coordination of social security systems. An equivalent protection for the increasingly important occupational or 'second pillar' pensions has never been established. Citizens who move between Member States – or even between different occupational schemes within one state – may lose out on their occupational pension, for instance, because of long vesting periods.

People who exercise their right to free movement should not be penalised. This not only represents a barrier to the mobility of individuals, it prevents the functioning of a genuine EU labour market where skills mismatches are reduced to a maximum and employers are able to recruit the right person with the right skills. We have underlined this in the Employment Package adopted in April of this year..

With a rapidly growing role for occupational pensions, the portability of second pillar pension rights is gaining importance. The Commission acknowledged this by proposing a Directive on the portability of supplementary pension rights in 2005. However, it proved to be difficult to reach an agreement in the Council.

The responses to the consultation on the Pensions Green Paper, launched by the Commission in 2010, showed widespread support among citizens and stakeholders to find a solution.

The European Council in June 2012 called for progress on the acquisition and preservation of occupational pensions. Cyprus, which currently holds the Presidency of the Council, has responded by including portability in their Presidency programme. The Commission is working closely with the Presidency to prepare the re-launch of the Directive.

There are other legislative initiatives in the pipeline. As you are aware, the services of Commissioner Barnier are presently working on a review of the Directive on Institutions for Occupational Retirement Provision, called the 'IORP Directive', which the colleague of the services of Commissioner Barnier will present in detail later this evening. And I am aware that many of you have expressed concerns about the potential effects of this initiative. As Commissioner Barnier has highlighted on several occasions, the Commission will ensure that the proposals it will make in this regard will not undermine occupational pension provision in the Member States.

In line with the further commitments undertaken in its White Paper, the Commission is working to promote the development of pension tracking services that would allow people to keep track of their supplementary pension entitlements acquired in different jobs. To put our money where our mouth is, we launched a call for proposals to support a pilot project on cross-border tracking.

To help Member States prepare their pension reforms by developing better models and by learning from the experiences of others, the Commission has launched another call for proposals in support of pension modelling and reform preparation. An important strand of this call concerns policies to enhance complementary savings.

In close cooperation with Member States, social partners and stakeholders, the Commission is working to deliver on the White Paper by setting up a range of best practices and voluntary codes. These will include:

• a code of good practice for occupational pension schemes which we will discuss with the EU Pensions Forum at its next meeting in October

• best practices on tax incentives and public support for private pension provision

• review of best practices regarding individual pension statements and information to individuals on retirement planning

• last but not least, the Commission recently proposed measures to improve information and protection standards for consumers regarding their third pillar, individual, pension.

We highly value the close and constructive cooperation with the pension area stakeholders, social partners and consumer representatives. Involvement of stakeholder for a such as the Pensions Forum is an integral part of our everyday policy work.

When we published the White Paper earlier this year, we wanted to give a positive "can do" message. The challenges of an ageing population and the economic crisis are huge, but by implementing the policies sketched out in the White Paper we can ensure that pensions remain adequate, affordable and sustainable — provided action is taken in time.

Seven months later, we are off to a good start. I am positive that our commitments to the citizens can be met, if we all join forces - Member States, EU institutions and stakeholders.

I look forward to continuing our work together.

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