News
BackThis week, the plenum of the European Parliament voted on the Report on the Agenda for Adequate, Safe and Sustainable Pensions. The clear commitment to ensure a universal, public pension scheme, which guarantees to provide old people with an at least adequate standard of living, is a positive sign. In doing so, the European Parliament clearly supports the first pillar as the continued important source of income for pensioners; however, it has been demanding time and again that both a funded occupational pension scheme as well as an individual pension scheme will be established within the scope of a third pillar. Unfortunately, the latter demand implicitly assumes that it will not be possible to sustain an adequate level of provision in the public systems in the long run – an almost absurd, but common misinterpretation!
Private pensions are not more cost-effective, but generally more expensive!
It is often the case that the reports of the European Parliament result in a compromise, which is more or less acceptable for all political forces. The same applies to the Report on the Agenda for Adequate, Safe and Sustainable Pensions, which mentions for example the importance of pay-as-you-go pension schemes. However, taking a closer look at the report, one notices that it also emphasises that both the development of funded occupational pension schemes as well as an individual pension scheme are vital to ensure that people’s retirement can be spent in reasonable comfort. However, there are reasons to doubt in particular the latter. Without giving any explanation, the report assumes that private pensions can accomplish what public pension schemes allegedly are unable to achieve. However, experiences over the past years have clearly shown that private pensions are not more cost-effective, but generally more expensive than public pension schemes; moreover, they are afflicted with significant capital market risks.
Increasing the employment rate is pivotal for adequate, safe and sustainable pensions
The report does correctly identify that - also in agreement with the targets of the Europe 2020 strategy on increasing the employment rate and tackling poverty - comprehensive and active labour market measures are necessary to reduce the degree of economic dependency between gainfully-employed and those not in employment. It is pleasing to see that in doing so the approach, which has been time and again represented by the Chamber of Labour, also towards the European Parliament, is being pursued, i.e. that the development of the economic dependency rate, hence the relation of those receiving benefits to those who are in gainful employment, is essential for the financial feasibility of pensions. The fact the European Parliament has integrated the position of the Chamber of Labour in its report, must be regarded as very encouraging and positive.
European Parliament: no automatic linking of legal retirement age to increasing life expectancy
It is interesting that the European Parliament points out for the first time that adjusting the factual to the legal retirement age should take priority in many Member States. So far, even in the European Parliament, the all too frequently voiced argument has been that increasing the legal retirement age would be key to solving all problems. One has also departed from the request to link the legal retirement age automatically to rising life expectancy. The Chamber of Labour has also rejected this and voiced this opinion on many occasions, as it is not acceptable that a computer system might actually decide on raising the legal retirement age. The final responsibility should remain with the political decision makers, because only they can be held democratically accountable.
Further information:
Adopted text by the European Parliament on the Pension White Paper
EU Pension White Paper: Short Assessment from the Point of view of the Chamber of Labour
It is often the case that the reports of the European Parliament result in a compromise, which is more or less acceptable for all political forces. The same applies to the Report on the Agenda for Adequate, Safe and Sustainable Pensions, which mentions for example the importance of pay-as-you-go pension schemes. However, taking a closer look at the report, one notices that it also emphasises that both the development of funded occupational pension schemes as well as an individual pension scheme are vital to ensure that people’s retirement can be spent in reasonable comfort. However, there are reasons to doubt in particular the latter. Without giving any explanation, the report assumes that private pensions can accomplish what public pension schemes allegedly are unable to achieve. However, experiences over the past years have clearly shown that private pensions are not more cost-effective, but generally more expensive than public pension schemes; moreover, they are afflicted with significant capital market risks.
Increasing the employment rate is pivotal for adequate, safe and sustainable pensions
The report does correctly identify that - also in agreement with the targets of the Europe 2020 strategy on increasing the employment rate and tackling poverty - comprehensive and active labour market measures are necessary to reduce the degree of economic dependency between gainfully-employed and those not in employment. It is pleasing to see that in doing so the approach, which has been time and again represented by the Chamber of Labour, also towards the European Parliament, is being pursued, i.e. that the development of the economic dependency rate, hence the relation of those receiving benefits to those who are in gainful employment, is essential for the financial feasibility of pensions. The fact the European Parliament has integrated the position of the Chamber of Labour in its report, must be regarded as very encouraging and positive.
European Parliament: no automatic linking of legal retirement age to increasing life expectancy
It is interesting that the European Parliament points out for the first time that adjusting the factual to the legal retirement age should take priority in many Member States. So far, even in the European Parliament, the all too frequently voiced argument has been that increasing the legal retirement age would be key to solving all problems. One has also departed from the request to link the legal retirement age automatically to rising life expectancy. The Chamber of Labour has also rejected this and voiced this opinion on many occasions, as it is not acceptable that a computer system might actually decide on raising the legal retirement age. The final responsibility should remain with the political decision makers, because only they can be held democratically accountable.
Further information:
Adopted text by the European Parliament on the Pension White Paper
EU Pension White Paper: Short Assessment from the Point of view of the Chamber of Labour