On 12 September 2018, a debate took place in the European Parliament in Strasbourg on the subject of “The future of pensions: fighting privatisation and strengthening public universal social security systems”. It was based on the European Commission’s Pension Adequacy Report 2018. The discussion focussed in particular on the Pan-European Personal Pension Product (PEPP), which, however, from the AK’s point of view entails some significant risks.
It looked as if the plenary sessions, requested by GUE/NGL would almost not take place. The author of the proposal to be debated, MEP João Pimenta Lopes, did not seem to be in a hurry. However, before Vice President Evelyne Gebhardt (S&D) was able to interrupt the session, Pimenta Lopes did take his place and opened the discussion with an initial statement.
First and foremost, the PEPP, proposed by the EU Commission, was in the interest of large European investment funds, which intended to gain access to employees' funds. In combination with the austerity measures in European countries, this would result in a further reduction of universal social security systems. Together with the European Semester, the Commission would work towards ensuring that the pay-as-you go system would be restructured to become a capital funded system.
In his speech that followed, Commissioner Günther Oettinger proposed the strengthening of a European Second Pillar, whereby he aimed at a Europe-wide solution within the meaning of the PEPP and not at private occupational pensions. These should be more understood as an offer and not as a demand to Member States; nobody intended to force anybody to implement the PEPP. The First Pillar (statutory pension) should have the determinative role in all Member States. However, strengthening the Second Pillar would be an answer to the issues dominating the demographic change in Europe.
In her capacity as representative of the current Council Presidency, Karoline Edtstadler, began by coming out in favour of adequate pensions in an aging society. In doing so, she put special emphasis on atypical employment, self-employment and the “gender pension gap”. The intention was to close the latter in Member States by promoting “work-life-balance”, the equal division of care responsibilities and general equality policies. In addition, one had to talk about problems of labour market participation, career opportunities, labour intensity and career breaks. However, Edtstadler did not go into any detail what exactly the concrete plans were. She ended her speech by saying that an ageing society and the level of debt of Member States would require a sustainable pension system. She reiterated this point later in a question and answer session and wanted it to be on record that pension reforms would have had a positive impact on the restriction of public spending in many Member States.
The contribution of EPP MEP Heinz K. Becker went along similar lines. With reference to the demographic development, he came out in favour of the pensionable age to start later. Apart from that, even though the First Pillar had to be given priority, the Second Pillar should be made more attractive. The PEPP would, in particular for young people, be a new good opportunity to provide for their old age, as it would offer a capital guarantee as an initial form of saving for a pension, which would be independent of the development of the capital markets. Apart from that, a guarantee would be provided for the contributions made. However, the Chamber of Labour regards this as doubtful.
From the AK’s point of view, one should basically favour a public contribution system; this is also the result of comparative studies between various insurance companies. In many cases, an insured person must live to a ripe old age for the amount of pension payments received to exceed the premiums paid. In addition, the Commission proposal on the PEPP significantly limits the termination options or does not contain any at all; and - that in case of changing the provider, capital protection ceases to apply has been stipulated.
From the AK’s point of view, this Commission proposal has to be significantly improved in order to alleviate any fears that policy is made only to please the financial industry.
AK Position Paper: Pan-European Personal Pension Product (PEPP)
AK EUROPA: Private pensions – a dubious new model at European level