Call to create pension ‘guarantee system’

Commission to start debate on reforms.

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The European Commission is to start a debate on reforms that should be made to Europe’s pensions systems. A policy paper calling for longer working lives and improved security of pension rights is expected to emerge on 30 June or 7 July. 

According to a draft seen by European Voice, the Commission will suggest the creation of an EU ‘pension benefit guarantee system’, which would compensate savers when pension funds default.

Legislation is also envisaged to protect people from losing pension contributions that they are owed by a bankrupt employer, along with improvements to protection under existing EU law on occupational pensions. Other ideas include legislating to ensure that people do not lose their supplementary pension rights when they move to a job in another member state.

It is “important to maintain the confidence” that people have in saving for their retirement, the paper says.

But the paper recognises the need to avoid pension-fund managers acting irresponsibly once they know that their members are protected, and to cope with the liabilities the system would impose on public finances.

‘Urgent’ reforms

The paper describes reforms to national pension systems as “necessary and urgent”. The Commission is seeking to galvanise member states into reforming their pension systems because it believes that the impact of the financial crisis on national budgets has made current arrangements unsustainable. It also believes that raising legal retirement ages would stimulate much-needed economic growth.

José Manuel Barroso, the president of the Commission, has said that the financial crisis has demonstrated the need for a “European approach to pensions systems”. In his view, EU-level action is needed to regulate pension funds and ensure that people can receive their pension entitlements even in economic downturns.

The policy paper contains ideas for reforming state pensions, as well as private pension schemes.

Anna-Sophie Parent, director of AGE Europe, an organisation representing older people, regretted the absence of an examination of how pension reforms will affect women, who are likely to be hit hardest by changes to entitlements.

The European Trade Union Confederation on 2 June warned governments against moves to “slash public expenditure, including jobs, pay and pensions, while the European economy is fragile”.