THE BLOG

Acting Now to Ensure a Liveable Pension Tomorrow

27/05/2013 22:26 BST | Updated 26/07/2013 10:12 BST

Action is needed to make sure pensions continue to ensure a decent standard of living and MEPs appealed to member states to safeguard public pension schemes in a resolution passed last week.

Pensions are a great way of providing older people with a minimum income, but their future is far from certain. Most state pensions in Europe tend to be funded through contributions by today's workers. This system is now under threat from the twin menaces of a rapidly ageing population and dropping birth rates. Increasingly, fewer workers are having to finance more retirees, a situation which is becoming untenable. Currently 17% of people in the EU are aged 65 or over, but by 2060 this will rise to 30%.

The crisis has made the need for action even more urgent. Countries are seeing revenues drop and are having to make significant budget cuts, which often leads to cutbacks in services or a reduction in benefits. These cuts often affect pensioners, many of who are already at risk of poverty. As unemployment has increased significantly, the ratio between workers and the people they support through contributions has deteriorated.

It's in this context that the European Parliament made its plea. Action is needed today to ensure that there are adequate and sustainable pensions tomorrow. Of course pensions are the responsibility of member states, so it's up to each member state to work out the mix of measures that will work best in their country, but in their resolution adopted on 21 May MEPs sketched out what could prove to be a successful strategy. They recommend maintaining or introducing diversified pension schemes, consisting of a combination of public pensions, complementary pensions resulting from collective agreements and companies as well as private savings. They also highlighted the advantages of coordination at the European level.

To ensure pensions remain affordable, it will also be important to increase the employment rate over the long term, for example by phasing out early retirement schemes or enabling people to work beyond the statutory retirement age if they want to. There should also be a focus on lifelong learning and combating the discrimination of younger and older workers in the labour market.

The resolution also says that people working abroad should be able to acquire and preserve occupational pension entitlements across the EU.

Any pension reform should involve full consultation with all age groups, from the young to the old, as all will be affected by the changes. The solutions should be balanced and fair in order to be supported across the generations.