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BackThe EU Commission will release a Green Paper on Pension Policy at the end of June. First details, however, have already been leaked. The EU Commission strongly warns that the future will bring a “painful combination of lower payments and higher contributions”, should the Member States fail to follow the advice of the EU Commission. Thus, the Commission indirectly addresses the extension of working life – a very sensitive issue throughout the EU!
The Member States continue to decide independently on their own pension system
Initially, the European Commission had intended to draw attention to their Green Paper on Pension Policy not before the end of June. Leaks in the Commission, however, are responsible for the fact that the content of the Green Paper has already been fiercely debated long before the planned publication date. Although the Commission immediately denied giving recommendations to the Member States, this cannot be fully dismissed. Fact is and remains that only the Member States decide on their own pension system. Using the indirect route via the forthcoming budget consolidations, triggered by the financial crisis, pressure is indirectly put on the Member States and their pension systems, as these account for an important part of public expenditure.
Average real pensionable age in the EU is just over 60
Compared to all OECD countries, the real pensionable age in the EU is significantly lower, on average 3.5 and for women 2.5 years less to be precise. Thereby, even today there are only three actively employed people for every pensioner in the EU. In 2030 - if the pensionable age remains unchanged - there would be two actively employed people for every pensioner and in 2060 pensioners would be in the majority, i.e. three actively employed people would have to work for four pensioners. A longer working life and an increased participation in gainful activity could soften this effect, according to the Paper. The EU States had decided as far back as 2005 to increase the real pensionable age to 65. If one now adds the 7 years, which account for the increased life expectancy by 2060, one would - in accordance with the Commission - have to extend the pensionable age by four years and eight months. This would in fact mean a pensionable age of 70 - 5 years more than originally agreed!
Pensions Green Paper meant to stimulate the debate for further steps of the Commission
By releasing the Green Paper at the end of June, the Commission intends to stimulate a discussion and to sound out what the Member States, but also all other relevant stakeholders have to say and which future direction they favour. This does not mean, that one can immediately expect legislative proposals as these are only legally possible in specific cases. What remains, however, is that the Green Paper talks about the necessity to extent working life if one wants to preserve adequate and sustainable pension systems in future. Thus, lower pensions are a real possibility if the objective to raise the real pensionable age at the same time is not successful. This obviously is also a challenge for employers as it is they who have the responsibility of employing workers until their pensionable age and not to terminate their employment contracts prematurely, which would be an additional burden to the national finances.
Initially, the European Commission had intended to draw attention to their Green Paper on Pension Policy not before the end of June. Leaks in the Commission, however, are responsible for the fact that the content of the Green Paper has already been fiercely debated long before the planned publication date. Although the Commission immediately denied giving recommendations to the Member States, this cannot be fully dismissed. Fact is and remains that only the Member States decide on their own pension system. Using the indirect route via the forthcoming budget consolidations, triggered by the financial crisis, pressure is indirectly put on the Member States and their pension systems, as these account for an important part of public expenditure.
Average real pensionable age in the EU is just over 60
Compared to all OECD countries, the real pensionable age in the EU is significantly lower, on average 3.5 and for women 2.5 years less to be precise. Thereby, even today there are only three actively employed people for every pensioner in the EU. In 2030 - if the pensionable age remains unchanged - there would be two actively employed people for every pensioner and in 2060 pensioners would be in the majority, i.e. three actively employed people would have to work for four pensioners. A longer working life and an increased participation in gainful activity could soften this effect, according to the Paper. The EU States had decided as far back as 2005 to increase the real pensionable age to 65. If one now adds the 7 years, which account for the increased life expectancy by 2060, one would - in accordance with the Commission - have to extend the pensionable age by four years and eight months. This would in fact mean a pensionable age of 70 - 5 years more than originally agreed!
Pensions Green Paper meant to stimulate the debate for further steps of the Commission
By releasing the Green Paper at the end of June, the Commission intends to stimulate a discussion and to sound out what the Member States, but also all other relevant stakeholders have to say and which future direction they favour. This does not mean, that one can immediately expect legislative proposals as these are only legally possible in specific cases. What remains, however, is that the Green Paper talks about the necessity to extent working life if one wants to preserve adequate and sustainable pension systems in future. Thus, lower pensions are a real possibility if the objective to raise the real pensionable age at the same time is not successful. This obviously is also a challenge for employers as it is they who have the responsibility of employing workers until their pensionable age and not to terminate their employment contracts prematurely, which would be an additional burden to the national finances.