Having regard to current EU initiatives which focus on pensions in Europe, this year and the next look to be the most intense and challenging years for pension provision in Europe that we will have seen for some time, says Patrick Burke, chairman of the EFRP.

The effects of the crisis and the budgetary restriction across EU countries have brought the reform of pension systems at the top of the policy agenda over recent years. In 2011, the European Commission had brought the pension issue into the political debate in a comprehensive way: in the Green Paper on pensions, security was addressed jointly with adequacy and sustainability. Unfortunately, this enlightened approach has not been pursued in the policy agenda setting. Surprisingly enough, the revision of the IORP directive (dir. 2003/41/EC) was launched at fast pace by the European Commission in the middle of 2011, in an isolated rush, aiming to impose new solvency requirements to pension funds and with a positive intent of reviewing the adequacy of governance, disclosure and member communication provisions. Other concerns were left to the White Paper on pensions, adopted only at the beginning of this year.      

This discrepancy has rapidly shown its limits and highlighted the need, recalled by the EFRP in fist instance, to look at pensions in Europe in a comprehensive way. The aim would be to adopt a policy approach which takes into due account social, economic and financial consequences of any initiative, in addition to respecting the diversity of pension systems across member states and the complex balance of competences between the European Union, member states and social partners. In an unprecedented move, European associations representing social partners, pension providers, fund managers and SMEs joined the EFRP to advise the commission against proposals which would discourage employers and employees from setting occupational pension agreements and result in pension funds withdrawing capital which would otherwise be available for investment in the real economy, by setting inappropriate solvency requirements at EU level.

The EFRP is confident that the European institutions have listened to this call. The field is now open for a joint work involving EU institutions, national governments, European and national associations, to set a legislative framework at EU level, which will secure adequate and sustainable pensions for a growing number of EU citizens. In fact, broadening the coverage of occupational pensions to the 60% of EU citizens who still don't benefit from a complementary pension remains an absolute policy priority. As highlighted by the European Commission itself[1], cost-efficient occupational pensions are the increasingly relevant and viable complement to progressively shrinking state-pensions: the only means to secure an adequate retirement income in times of tightening public budgets and growing longevity.

Bridging the gap

Our organisation will continue its work to ensure that this purpose will we be put at the top of the European policy agenda on pensions. In this perspective, we acknowledge a constant growth trend of DC schemes in Europe and a possible evolution of their characteristics: these trends should be supported through measures, aiming to enhance protection and information of pension beneficiaries further, particularly with reference to risk profile and the income which can be reasonably expected at retirement. Moreover, some successful national experiences can be extended at EU level. For example, auto-enrolment has proven to be a viable and effective option to secure occupational pension coverage of employees. Mutual learning and exchange of best practices amongst member states, within the EU institutional framework, are useful instruments to widen its application at EU level.

The EFRP continues to make the bridge between national associations, member states and EU institutions, to build on this experience and successfully expand it at EU level. Moreover, following the suggestions in the White Paper, the EFRP will bring the expertise cumulated across member states and make it available at EU level, to design cost-efficient pension systems, contribute to the development of voluntary codes good of conduct in workplace pension provision and identify persisting tax obstacles to cross-border pension provision.

As seen, the years ahead will lead to changes in the landscape of pensions in Europe: workplace pensions, if properly addressed, will represent a viable support for possible evolutions in the functioning of pension systems. In full respect of diversity of national pension systems, the road is open for mutual learning and joint progress of member states, within the EU framework. In fact, despite national differences, challenges are common at EU level: increased longevity, shrinking public budgets, the need for increased coverage and for sharing experiences in designing cost-efficient complementary systems.

Patrick Burke, chairman of the European Federation for Retirement Provision (EFRP)

EC, White Paper, An Agenda for Adequate, Safe and Sustainable Pensions, CON(2012)55/2,  p. 12.