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European Commissioner responsible for Employment, Social Affairs and Inclusion
The role of pension funds in active ageing and solidarity between generations
Conference on "The Role of Pension Funds in Active Ageing and Solidarity between Generations" / Brussels
21 January 2013
Ladies and gentlemen,
I am grateful for the chance to address you at the close of this conference.
Pension funds are there — first and foremost — to serve a social purpose.
Only in second place should they act as financial institutions, given the huge assets they manage.
They can make a major contribution to tackling the challenge of demographic change and underpinning the sustainability of public finances and, more generally, economic performance.
In their capacity as major institutional investors, pension funds can help stabilise markets and promote more responsible investment.
In the light of population ageing and the economic challenges it implies, we must ensure that pension systems continue to fulfil their fundamental role of providing the retired with adequate income.
Faced with the deep systemic crisis in the euro area and the serious risks this holds for European integration, the case for stricter economic governance at EU level has rapidly gained ground.
The EU has moved at unprecedented speed to take remedial action to strengthen economic governance. But the crisis is not yet over and has increasingly become a social one.
A closer Economic and Monetary Union is crucial if Europe is to come through this financial, economic, social and political crisis.
Fiscal discipline, financial responsibility and growth and competitiveness are key building-blocks, but they cannot suffice on their own.
The long-term sustainability of Economic and Monetary Union also calls for solidarity.
As the Member States push ahead with further fiscal and economic integration to complete Economic and Monetary Union, it is vital to clarify and strengthen its social dimension.
I am glad to note that this has been acknowledged by the Heads of State or Government at their last summit in 2012.
A failure to develop the social dimension ultimately would undermine the European social model. That is why the roadmap for completing Economic and Monetary Union should also look at the social standards we want to uphold.
The upcoming weeks will be crucial to see how this discussion will take shape with a view to the June 2013 European Council.
A key contribution to the debate on the EU approach towards social reform will be the Social Investment Package that the Commission will be presenting next month.
It will set out an agenda for social policy to help the Member States carry out the structural reforms needed to come out of the crisis stronger, more cohesive and more competitive.
It will outline how investment in social policy can strengthen people’s ability to take risks, improve their employment prospects and enable them to play a full part in the economy and society throughout their lives.
It will also build on what the 2012 European Year for Active Ageing and Solidarity between Generations has achieved.
The European Year has given rise to thousands of new initiatives and events at European, national and local level.
Crucially, it has also mobilised a wide range of stakeholders across Europe. These include pension funds, as we have seen at today's conference.
I believe it has brought a positive change in the way people view ageing, and has popularised the concept of active ageing in many countries.
The guiding principles on active ageing and solidarity between generations adopted by the social affairs ministers in December last year will help national authorities and other stakeholders to sustain the efforts to promote active ageing.
Ladies and gentlemen,
We know that pension funds are called upon to play a greater role in providing retired Europeans with an adequate income.
Many reforms adopted recently will result in lower statutory pensions. This is inevitable as Member States seek to ensure that public pensions remain affordable while the economic burden of population change increases.
This leaves more scope for supplementary pension provision. But we cannot rely on pension funds to fill this gap spontaneously.
We need to create the right conditions for them to develop and provide secure benefits at a reasonable cost.
This is primarily the Member States’ responsibility but since we are operating in a single market, this responsibility falls upon the EU as well.
While recognising their inherent social function, pension funds also need to be compatible with the fundamental freedoms of the European Union.
In particular, people who move across borders must not lose out on their rights. I am glad therefore that the work on the so-called portability directive, on the preservation and acquisition of supplementary pension rights, has been resumed under Cypriot presidency and will be actively pursued under the current Irish Presidency.
Governments are having to cope with huge deficits and low employment. So they are clearly finding it harder to provide adequate pensions, and the same is true of pension funds, which suffer from low yields.
Both public and private pension schemes have to cope with the challenge of rising life expectancy. This calls for a change in people’s attitudes to retirement and to retirement age.
With life expectancy going up, we need to work longer to save enough for retirement.
The Social Protection Committee’s first Pensions Adequacy Report published last year stresses that longer working life will be the key to pension adequacy in the future.
Pension funds must help meet the goal of extending working life, and not just by raising the age at which they pay out.
They need to help develop measures that enable people to work longer, design incentives to stay in employment and come up with alternatives to early retirement — including more flexible employment arrangements in line with older workers’ needs and abilities.
The Commission 2012 White Paper on pensions called on the Member States and the social partners to reconsider mandatory retirement provisions in legislation and collective agreements.
We started talking about this with the social partners and stakeholders at the Pensions Forum last October, and we look forward to continuing the discussion this year.
One problem with pension systems is that they insufficiently recognise people’s diversity. Generally, they cater well for people working full-time for their whole working life and for the same employer. But that is far from the reality on the labour market today.
Many occupational pension schemes certainly have some way to go in terms of adapting to the needs of people with differing career patterns that include career breaks, job changes and part-time working.
Ladies and gentlemen,
Tackling the challenges facing our pension systems is not just a task for governments.
It also needs to be a priority in social dialogue between management and labour.
This is where the key stakeholders can shape the workplace of the future to allow people to stay on the labour market longer and save for a comfortable retirement.
The crisis has triggered a wave of pension reform across Europe. This is a necessary part of efforts to consolidate public finances in the short term and make our pension systems sustainable in the longer term.
But the pace of reform has also meant that the social partners were often not involved as closely as we might have wished.
Pension reform and employment practice need to be in sync if we want our active ageing strategies to succeed.
People need to be able to plan ahead. And a sound consensus — not just among political parties, but also among the social partners — is crucial for a steady transition to more sustainable pension systems and for public support and confidence.
The review of Industrial Relations in Europe, a report the Commission produces every two years, will in its forthcoming edition pay a particular attention to the role of social dialogue in pension reform.
Ladies and gentlemen,
Because of their crucial importance to people’s livelihoods and the huge amounts of money they involve, pensions and their reforms will be directly involved in our efforts to come to a closer Economic and Monetary Union with a strong social dimension.
The Commission attaches great importance to cooperation and dialogue with stakeholders and the social partners on this all-important subject.
Today’s conference shows that pension funds are prepared to take up the challenge and be fully part of the efforts to keep our welfare systems sustainable and adequate.