Social protection and social security, plus the need for extending working lives, are emphasised in its Report on Adequate and Sustainable Pensions compendium published by the EC. The newly issued document, prepared jointly by the European Commission's Directorate-Generals for Employment and Economic and Financial Affairs, also includes the comparative progress of the relevant legislative framework in the different EU countries. In addition, it is stuffed with statistics, and tables such as on median pensions relative to earnings, risk of poverty, and an overview of national strategies.

According to the publication, which contains some text sections translated into German and French, there has been substantial reform of pension systems since 2003. However, advance is mixed, with some member states still in the early stages, while several achieved comprehensive reforms, it finds.

In its 260-pages, it reports that some EU nations are increasing the level of guaranteed minimum pensions, and many recognise care work when calculating pension entitlements.

The document continues that the provision of supplementary pensions has strengthened in the EU. In many of its countries, the contribution of privately-managed pensions to pensioners' living standards in retirement is expected to grow over the coming decades, even though public pay-as-you-go schemes will remain the main pension source.

The publication finds that inadequate pensions are a serious threat to social cohesion, and there is a risk of poverty and social exclusion growing.

A major theme, if not the predominant theme, of the report is on the need to extend working lives. On the employment rates of older workers (55-64), the authors note that for the EU-15 this has increased in recent years, from 36% in 1995 to 42% in 2004. For the EU-25 it increased from 36% in 2000 to 41% in 2004, also reversing a long declining trend.

However, it adds that in a number of EU nations, the employment rate for older workers lies below or around 30%, citing Belgium, Italy, Luxembourg, Hungary, Malta, Austria, Poland, Slovenia and
Slovakia.

For the bracket between 30% and 45%, it goes on, the list comprises Czech Republic, Germany, Greece, Estonia and France. Between 45% and 55%, it lists Latvia, Lithuania, the Netherlands, Estonia, Ireland, Cyprus, Portugal and Finland. It exceeds 55% only in a few nations, that is, Denmark, Sweden and the UK. However, in nearly all member states, recent reforms have strengthened incentives to extend working lives (especially for statutory schemes), and reduced access to early retirement.

 

On the theme of later retirement, the document suggests that motivating people to make their own choices about when they retire can be considered even more efficient than restricting the exit from labour markets by statutory retirement ages or financial disincentives.

It writes that a number of EU governments have reported mechanisms to reward deferred retirement and discourage early retirement. For example, some EU nations work through higher accrual factors. An instance of this is the Czech Republic's offer of a more generous accrual rate (1.5% for each 90 days rather than the annual 1.5%) for deferring retirement (ie, this can amount to an 8% annual increase, in the old age pension) beyond the statutory pension age.

In Luxembourg, the increase after the official retirement age is 3% per year, in Germany and Hungary 6%, in Slovenia 7.5%. Denmark has also adopted a supplement for deferred public old-age pension. In Portugal people can earn 10% for each calendar year worked after the statutory retirement age of 65 (if they have accumulated 40 years of registered earnings) up to the age of 70.

The UK is offering unlimited deferral and an incremental rate of 10.4% for each full year of post-
poned retirement, and, for the first time, the choice of a lump sum instead of an enhanced weekly state pension for those who defer their state pension for 12 months or longer. Estonia is offering a high of 11% per year of deferring.

However, this has not been widely taken up, probably due to the limited promotion.

Incidentally, presumably because such name-and-shame techniques (which are used to effect throughout the document) may be considered to be politically incorrect, the document comes with a disclaimer that its contents do not necessarily reflect the position of the Commission's employment DG.

The report says that recent reforms include automatic or semi-automatic review mechanisms by governments of their pension rates, together
with efforts to inform citizens about their pension rights, build public confidence.

Other developments are the reduction of disincentives to work longer coupled with the strengthening of incentives to remain active. Links between contributions and benefits have been tightened and life expectancy is now more commonly taken into account when calculating pension formulae.

The document suggests that motivating people to make their own choices about when they retire can be considered even more efficient than restricting the exit from labour markets by statutory retirement ages or financial disincentives.

It writes that a number of EU governments have reported mechanisms to reward deferred retirement and discourage early retirement.

In one of the report's several conclusion sections, under a chapter heading ‘sustainability', the authors find that the potential contribution of employment policies to the sustainability of pension systems could be more fully exploited. Meeting the employment objective of 70% in 2010 can contribute to pension sustainability, they state. They add that it is clear that some member states need to step up their activities during the coming five years in order to achieve this target. Reaching this objective alone will not, however, solve the issue of financial sustainability of pension systems.

The ‘Report on Adequate and Sustainable Pensions' is available from the Office for Official Publications of the European Communities, via sales agents, or from http://publications.europa.eu