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European Union Pension Reform Outlook Ruth Paserman

Explore the current state and future directions of pension reform in the European Union, covering public and private pensions, legislative frameworks, policy coordination, and sustainability challenges.

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European Union Pension Reform Outlook Ruth Paserman

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  1. European Union • Pension Reform Outlook • Ruth Paserman • Deputy Head of Unit Social Protection, Social Services • EUROPEAN COMMISSION • DG Employment, Social Affairs and Equal Opportunities

  2. Pension policy in the European Union • Public pensions: • Coordination of social security schemes • Coordination of pension policy at political level (no harmonization) • Occupational, private pensions: • Trend towards more legislation Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  3. Co-ordination of social security schemes • Why? • Freedom of movement of the European Union citizen • How? • Regulation 1408/71/EEC on co-ordination of social security schemes • Summing up of contribution periods in different schemes and paying of benefits by the country of domicile • No comparable instrument for supplementary pensions Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  4. Some elements of European legislation: • Insurance Directives • Directive 98/49 on safeguarding supplementary pension rights of employed and self-employed persons moving within the Community • Directive 2003/41 on the activities and supervision of institutions for occupational retirement provision (IORP) • Proposal for a Directive on portability of supplementary pension rights Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  5. Open Method of Coordination • Social inclusion, Pensions, Health • Definition of common objectives and agreed indicators • National reporting • Evaluation and synthesis in order to facilitate mutual learning and exchange of good practices • All this through Social Protection Committee, in link with Economic Policy Committee and Employment Committee Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  6. Policy co-ordination... Why? • Member States depend on each other • Mutual challenges • Legitimacy for difficult reforms • Policy design: learn from each other • Right for social policy to intervene in EU financial and employment policies • Balanced European goals for pension reforms: Influence also on other co-ordination processes Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  7. Objective: • Providing adequate and sustainable pensions • Adequacy • Sustainability • Modernisation Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  8. Synthesis report on pensions 2006 • Common policy challenges • Working longer – labour market reforms • Strengthening the link between contributions and benefits • Adjustment to the structural change in society and labour market • Minimum pensions • Improved governance • Private pensions: supplement or replace public provision? New tasks for State Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  9. Trend of replacement rates at a given age • A trend toward a decline in most statutory schemes Source : Stylised illustration from ISG results on gross replacement rates Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  10. How to compensate for this decline ? Working longer and private pensions Source : Stylised illustration from ISG results on gross replacement rates Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  11. The role of private and supplementary pensions in the EU • An expected increase of the contribution of privately managed schemes to the income of retired people • But public PAYG pension schemes are expected to remain the principal source of income of pensioners in all but a few Member States Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  12. Current situation Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  13. Current situation and expected evolution in selected countries Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  14. New and proposed EU legislative requirements – Portability Directive, IORP and Solvency II • IORP • pension funds benefit from the Internal Market principles of free movement of capital and free provision of services. • establish rigorous prudential standards ensuring that pension beneficiaries are properly protected • Portability • facilitate the acquisition of occupational pension rights • guarantee an adequate protection of dormant rights of outgoing workers, facilitate the transfer of acquired pension rights and • ensure appropriate information of workers in the event of professional mobility • Solvency II • a fundamental and wide-ranging review of the current insurance Directives • ensure adequate policyholder protection in all EU Member States. • Increase the level of harmonisation in general, including that of supervisory methods, tools and powers Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  15. Further investigation – report 2008 • Transition costs and impacts when changing from p-a-y-g to funded provision • Decumulation phase of private and supplementary pensions • Information requirements • Administrative costs Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  16. International experiences of administrative costs – can these be lowered? Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  17. Key challenges • Future adequacy • Administrative charges • Transparency • Portability • Solidarity • Security • Data Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  18. Conclusions • The rising complexity of pension systems and the importance of common issues is closely linked to adequacy and sustainability • Special Study for the Social Protection Committee to feed into the next joint report Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

  19. Further information • All information about the European Union: • http://europa.eu.int • Synthesis reports on Pensions (2003, 2006) and the National Strategy Reports (2002, 2005): • http://europa.eu.int/comm/employment_social/soc-prot/pensions/index_en.htm • Reports by the Economic Policy Committee on the budgetary implications of ageing: • http://europa.eu.int/comm/economy_finance/epc/epc_ageing_en.htm Directorate-General for Employment, Social Affairs and Equal Opportunities ─ Unit

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