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Summary of European Commission Green Paper

towards adequate, sustainable and safe European
Pension Systems

7 July 2010


Introduction 3

Green Paper 5

General Questions 13

Stakeholder Response 16


With Europe’s population ageing rapidly urgent steps are required to boost Europe’s diversity of
retirement provision. Any lingering doubts that Europe’s over-reliance on pay-as-you-go state
pension systems was in any way sustainable have been shattered by the financial crisis, the ensuing
economic recession and the need for fiscal consolidation. That Europe’s citizens need "an adequate
and sustainable retirement income" is more apparent than ever.

And so it is that the European Commission has sought to kick-start a timely discussion on what steps
Europe should take next in addressing this pressing need. The solution to the problem is clear;
people need more help to stay in work for longer, there needs to be more reform towards multi-
pillar pension provision with less reliance on the state; and the vehicles through which people are
expected to build retirement provision need to be accessible, affordable and safe. The Commission
acknowledges in its paper that much of this work will be conducted at the Member State level.
Indeed in many countries this process is underway.

Schemes like the National Employment Savings Trust, or NEST, currently being developed in the UK,
will require auto-enrolment of workers (though not for the self-employed) and require contingent
employer contributions. In much the same way that the UK was willing to learn from examples in
countries like Sweden, other EU Member States need to look closely at these initiatives and act
quickly to replicate the parts that work well. The European Union will play a limited role in this
process, though it is not entirely redundant. As the UK has already discovered in the case of auto-
enrolment, EU rules in the Distance Marketing Directive and the Unfair Commercial Practices
Directive have hindered its attempts to widen access to pensions through contract-based pension
arrangements. The EU needs to be more responsive in removing such barriers when they become

While the Commission will not incur on Member States' prerogative in pensions, it does need to
improve the functioning of the internal market and the clear message for the Commission should be
to focus its energies on what it can realistically hope to achieve rather than grandiose, but ultimately
futile gestures.

Measures like the proposed European Year on Active Ageing in 2012 will generate more costs than
benefits. Hosting roundtables for those in Brussels who are already converted to the cause and the

odd regional outreach event might generate good PR but will do little to shift the fundamental
issues. With 60 million Europeans enrolled in DC pensions - a figure which will grow rapidly in the
coming decades – meaningful efforts to ensure adequate investor protection against mis-selling as
well as protection of member's fund benefits are areas where the EU can play a role. As the green
paper highlights the issues of governance, risk management, safekeeping of assets, investment rules
and disclosure all need to be further enhanced. This process can benefit from coordination at the EU
level, which currently provides a patchwork quilt of disclosure requirements across the various

Any delusions about creating a single retail market for life and pension products should not be on
the agenda. Currently, less than 1% of Europe's consumers are mobile in that they buy financial
services cross border. The barriers to purchasing complex investments where local tax and social
security systems play such a major role, and where much of the language is highly technical, means
that we should expect little progress in the coming years especially as much of Europe currently
lacks access to any sort of independent pension advice market. The Monti Report's suggestion of a
'28th regime' is a red herring, typical of the sort found in EU policy debates. Neither the industry nor
the consumer wants it. It would not tackle the fundamental issues while adding more rules and more
complexity in the medium-term.

The EU's focus in supporting Member States' efforts to improve the adequacy of pension systems
must start by properly recognising the investment value chain, and how regulation applied upstream
in capital markets, can reduce market efficiency and increase investment costs, resulting in lower
investment returns downstream which means lower retirement incomes for Europe's savers. This
view was taken to focus the Commission’s efforts as part of the Asset Management White Paper.
The same thinking should be applied here yet we see key planks of the financial stability regulatory
reforms possibly having a negative impact in this respect.

A key early test will come in the Alternative Investment Fund Management Directive. With the
Pensions Green Paper arguing that post-financial crisis more must be done to improve the efficiency
and safety of pension schemes, it is critical that the AIFM contains the necessary passporting
arrangements which provide adequate third country access to Europe's pension fund market. The
ability to invest in a diverse range of asset classes and a geographically diverse range of markets is
central to ensuring a fully diversified investment portfolio and the best investment returns. This
means continued access to the broadest range of investment funds possible including hedge funds

and private equity funds from around the world. The outcome of the AIFM trialogues, being
conducted over the summer, will be a key test in the EU's desire to improve efficiency for Europe's
pension fund sector. If Europe chooses protectionism, then it will be Europe’s pension savers who
ultimately pay the cost.

One omission from the green paper which deserves more attention is that of the free movement of
people. The green paper recognises the need to increase the free movement of labour, yet it is silent
on dealing with the negative impacts of labour mobility on regional development within the EU.
Europe needs to support those countries and regions which continue to suffer from the structural
regional imbalances which have led to the brain drain from East to West. Failure to do so will have
implications for pension systems and pensions policy.

The massive transfer of people within Europe's borders has helped to ameliorate the problem of an
ageing demographic in some countries. Notably the influx of over 1 million East Europeans into the
UK since 2004 has helped to improve the UK’s ratio of workers to retired people but this has
happened at the expense of countries such as Poland which are consequently ageing more rapidly as
their youthful, more mobile workers migrate in search of better employment opportunities. Unless
the regional imbalances which drive this migration are addressed, the pressures of pensions systems
in East Europe become all the more dire placing even greater pressures on the social and economic
cohesion of Europe’s economies.

Mark Twigg
Cicero Consulting Ltd

Green Paper:

1. Introduction
The European Commission Green Paper1 begins with declares that an adequate and sustainable
retirement income for EU citizens now and in the future is a priority for the European Union, but
achieving this is a major challenge for which many member states have tried to prepare through
pension reforms.
The report highlights that the recent financial and economic crisis has aggravated the impact of the
severe trend in demographic ageing. The crisis has made it more urgent to adjust retirement
practices and revealed as well that more has to be done to improve the efficiency and safety of
pension schemes.

In his political guidelines European Commission President José Manuel Barroso reiterated the
importance of an adequate pensions system for social cohesion in Europe: “We need to ensure that
pensions do the job intended of providing the maximum support to current and future pensioners,
including for vulnerable groups.”

The European Commission makes it very clear that the member states are responsible for pension
provision and that the Green Paper does not question Member States' prerogatives in pensions or
the role of social partners and it does not suggest that there is one 'ideal' one-size-fits-all pension
system design. However, some common themes need to be addressed in a coordinated way such as
the functioning of the internal market, the requirements of the Stability and Growth Pact, or
ensuring that pension reforms are consistent with the Europe 2020 strategy. EU policy coordination
on pensions has proven useful and necessary to make progress at Member State level. Pension funds
are an integral part of financial markets and their design can promote or inhibit the free movement
of labour or capital.

After years of reforms in the member states, a thorough review of the EU framework is necessary
and thus, the European Commission Green Paper is launching a European debate through extensive
and early consultation on the key challenges facing pension systems and how the EU can support
Member State efforts to deliver adequate and sustainable pensions.

(COM(2010) 365/3

The European Commission states that the Green Paper takes an integrated approach across
economic, social and financial market policies and recognises the links and synergies between
pensions and the overall Europe 2020 strategy.

2. Key Challenges

2.1 Demographic ageing

The Green Paper reiterates that it is well known that Europe is facing a major demographic challenge
and that Europe’s working-age population will start to shrink from 2012 onwards.

Increasing life expectancy and declining fertility rates will lead to a change in the age composition of
the population. Thus, where at present there are four people of working age for every person over
65; by 2060 there will be just two people of working-age for every person over 65.

Other trends that are apparent are the starting of full-time working lives later due to educational
requirements and retiring early due to labour market age management policies. The Green Paper
declares that on present trends the situation is untenable. The impact of the demographic
challenge, as aggravated by the crisis, will tend to reduce economic growth and put pressure on
public finances.

Another trend the that the European Commission notes is societal change, which is fuelling more
formal provision of care services otherwise provided within the family. This poses further challenges
to the financing of the cost of health care and long-term care.

2.2 Changes in pension systems

The Green Paper states that member states’ pension systems are different and most have been
adapted to put them on a more sustainable footing in the past decades. According to the European
Commission, key trends have been:

 Encouraging more people to work more and longer to obtain similar entitlements as before
 The move from largely single to multi-tiered systems
 Measures to address adequacy gaps
 Addressing the gender dimension
 Increases in retirement age

The Green Paper recognises reforms have given and will continue to give rise to greater individual
responsibility for outcomes and for reforms to be successful, all pension schemes must deliver their
part and risks must be well understood and managed. Future pension adequacy will rest on a
combination of returns in financial markets and labour markets delivering opportunities for longer

and less broken contributory careers. Furthermore, to strengthen social cohesion, a number of
Member States may want to address outstanding issues such as minimum pensions, coverage of
atypical workers and crediting of some involuntary employment breaks, for example when caring for
frail dependents. Thus, in many member states further reforms are needed in the future.

2.3 Impact of the financial and economic crisis

The Green Paper states that the challenges above have been aggravated by the financial and
economic crisis and it has acted as a wake-up call for all pensions, whether PAYG or funded. It is
recognised that private schemes can relieve some of the pressure on public pension provision, but
increasing reliance on private schemes has fiscal costs, given the widespread practice of providing
tax incentives during the accumulation phase. Thus, if private schemes cannot deliver, there will be
pressures on the public purse to pick up the tab.

Fiscal constraints will be very great in the next years, because of the scale of fiscal deterioration
following the crisis. Estimates suggest that the crisis will put further pressure on public pension
spending over the long-term because economic growth is set to be considerably lower and there is
great uncertainty as to the timing of the full recovery.

Furthermore, variations in the ability of funded schemes to weather the crisis have demonstrated
that differences in design, regulation and investment strategy clearly matter. Unfortunately,
schemes in countries where solvency requirements were lower and asset value losses particularly
large also tend to have poorer protection of accrued entitlements and the least flexible mechanisms
for burden sharing. As a result, entitlements can be lost and providers inclined to discontinue
schemes, since they cannot afford to bring schemes back to solvency.

The Green Paper notes as well that the crisis will also have a serious impact on future pensions as
many workers will have lost their jobs and have been unemployed for a certain period and others
might have had to accept lower earnings or shorter working hours. Thus, it will be important to
ensure that adequate levels of pensions can be maintained also in these situations.

According to the European Commission the crisis has added the following dimensions to the pre-
existing reform agenda:

 A more pressing need to address adequacy gaps

 A more pressing need for reforms that improve the sustainability of public finances
 An increased emphasis on raising effective retirement ages
 A need to revisit the regulation of funded pension schemes to ensure that they are efficient
and remain safe in the wake of major financial crises whilst ensuring regulation is

proportionate and does not push employers into insolvency or into abandoning pension
 A need to ensure that financial market regulation is effective and intelligent given the
growing role of pension funds. The G20 Pittsburgh and Toronto summits emphasised that all
financial institutions should be regulated and that there is a greater need for common rules

3. Priorities for modernising pension policy in the EU

3.1 Overarching objectives: adequacy and sustainability

The overarching objectives of pension reforms are to ensure that pension systems are adequate and
sustainable. These are two sides of the same coin and need to be considered jointly.

Addressing pension adequacy

According to the Green Paper, ensuring adequate retirement income is the purpose of pension
systems and is a matter of fundamental inter- and intra-generational solidarity. However, most
reforms have been aimed at sustainability, so now adequacy gaps must be addressed. As public
pension replacement rates will decline it is important to provide sufficient opportunities for
complementary private pensions. Other gaps identified in the Green Paper are the lack of
compensatory crediting, the lack of coverage of vulnerable groups and insufficient minimum pension
guarantees for older people. In privately funded schemes, attention must be paid to reducing
investment risk and improving risk sharing between savers and pension providers.

Securing sustainability
Many pension reforms have contributed to limiting the increase in future public spending, but the
Green Paper calls for additional steps to ensure long-term sustainable public finances. The Stability
and Growth pact is the framework to monitor the sustainability of public finances, including pension
systems. As public spending might increase further reforms enhancing the EU’s economic growth
potential are therefore particularly important. The Green Paper highlights higher labour productivity
and higher employments rates as beneficial for all EU citizens as it enables higher living standards.

3.2 Achieving a sustainable balance between time spent in work and in retirement
At present, typically about one third of adult life is spent in retirement and this will increase
substantially due to increased life expectancy, unless the length of working life increases and people
retire later. The Green Paper recalls in this respect commitments made by Member States at the
2002 Barcelona European Council to postpone the retirement age by five years, which is also
inconsistent with the objective of reaching the Europe 2020 75% employment rate target.

Many Member States have already decided to increase the eligibility age for a full pension in their
public schemes. A number of Member States have also demonstrated that linking the age to a higher

life expectancy is a promising policy option for strengthening the sustainability of pension systems.
The Green Paper notes however that with view to the feasibility of universal pension ages
differences in labour market entry ages and in workers’ health status need to be taken into account.

The Green Paper poses the question whether common EU principles for adequate and sustainable
pensions can be helpful for enable on the one hand building adequate retirement systems while on
the other hand making EU economies more sustainable. New technologies and developing new skills
can help to accommodate older workers longer in the workplace.

Member States are also taking measures to support longer working lives, mainly through health
policies aimed at helping citizens age in better health. Poor health is according to the Green Paper
one of the drivers of early retirement.

3.3 Removing obstacles to mobility in the EU

Greater flexibility in job mobility supports the adjustment capacity of the economy and strengthens
the European social model, bringing benefits for all citizens.

Strengthening the internal market for pensions

The Green Paper notes that there are still considerable barriers to cross-border activity which
prevent the full realization of efficiency gains arising from economies of scale and competitions
which increases costs and restricts consumers’ choice. Such barriers are in many cases the result of
regulatory differences and legal uncertainties, and removing these may require a review of the
Directive on Institutions for Occupational Retirement Provision (IORP), which adopted in 2003.
Although the internal market for insurance products has been in place for a longer time, cross-
border activity for life assurance products has also remained limited. The Internal Market could also
extend access to additional sources of retirement income beyond pensions.

Mobility of pensions
For the past five decades the EU has issued Regulations on the coordination of social security
systems to protect pension rights of mobile EU citizens. The new Regulations 883/2004 and
987/2009 expand this protection, but are limited to statutory and occupational pension schemes
where rights are based on legislation and thus do not cover more recent national reforms. The
Green Paper identifies discriminatory tax rules as another obstacle to the mobility of pensions.
The Commission in 2005 proposed a Directive setting minimum standards for the acquisition,
preservation and transferability of pension rights. Despite a revision of the proposal in 2007, no
agreement in the Council has been reached. The Green Paper therefore calls for renewed impetus to

reach a solution for all mobile workers. In this respect the Green Paper notes that an EU-wide
pension tracing system, as currently in place in some Member States, could help.

3.4 Safer, more transparent pensions with better awareness and information
The Green Paper attaches importance to the notion that safety in pensions is vital to support
adequacy, and notes that the macroeconomic benefits of safe and adequate pensions can be felt
quickly as pensioners are a growing source of stable and regular consumption. But contrasting
developments in Member States' pension systems raise new policy questions.

Closing gaps in EU regulation

As pension provision moves from single to multi-tiered systems and from simple to complex pension
packages, the fragmented and incomplete character of the current European framework may no
longer be sufficient. The Green Paper identifies four gaps in EU regulation that need closing:

 Reforms have led to some funded pension schemes, both public and private, being covered
by EU regulation in some Member States but not in others which is not consistent with
agreements made at G20 level, nor does it reflect the fact that pension funds have become
major players in financial markets
 Similar pension schemes are covered by different EU rules, raising issues of consistency.
 There are unclear boundaries between: social security schemes and private schemes,
occupational and individual schemes, and voluntary and mandatory schemes
 It is not always clear what differentiates general savings from pensions. This raises the
question whether the label 'pension' should not be restricted to a product that has certain
features such as security and rules restricting access including a payout design which
incorporates a regular stream of payments in retirement

The Green Paper also notes that the trend towards defined contribution (DC) schemes rather than
defined benefit (DB) schemes continues with nearly 60 million Europeans enrolled in DC schemes. It
notes in this respect that while occupational DB schemes provide greater certainty about future
retirement income they can be an untenable burden on employers.

DC schemes will continue to grow in importance. However, while the sponsor does not bear the
financial risk and DC schemes are more likely to promote longer working lives, a key implication is
that they shift the investment, inflation and longevity risks to the scheme’s individual members, who
are less well placed to bear these risks. The Green Paper mentions minimum return guarantees, life-
styling portfolio compositions, good economic and public finance policies, and better regulation as
examples of how to reduce these, achieving a better balance between risks, security and
affordability for both savers and providers. In addition, hybrid schemes, which combine elements of
DB and DC schemes, may also reduce these risks.

International policy discussions on OECD level raise the question whether current EU regulation is
able to cope with the shift towards DC schemes. According to the Green Paper, this may require a
reassessment of the IORP Directive in areas as governance, risk management, safekeeping of assets,
investment rules and disclosure.

Improving the solvency regime for pension funds

The European Commission’s seeks to know whether the Solvency II Directive, entering into force in
2012, should also apply to IORPs. Member States have also taken different approaches to protecting
acquired pension rights. A Commission consultation and hearing in 2008 and 2009 revealed the need
among shareholders for a similar solvency regime specifically for pension funds and that it is
important to avoid pro-cyclical solvency rules. The Green Paper notes that the suitability of a
Solvency II approach needs to be considered in a rigorous impact assessment. In the light of
comparable developments in banking, insurance and investment, the Green Paper seeks whether
there is a need for promoting pension benefit guarantee systems in the Member States, and
whether this should be coordinated or facilitated at EU level.

Addressing the risk of employer insolvency

The Green Paper notes that the financial and economic crisis is likely to increase the number of
company insolvencies. The Commission published in 2008 a Staff Working Document on the
implementation of the provision concerning supplementary occupational pensions contained in the
Insolvency Directive, followed by a study in 2009 covering DB and book reserve schemes. The
Commission is currently gathering information on the protection of unpaid contributions to DC
schemes in case of employer insolvency.

Facilitating informed decisions

The Green Paper states that the trend towards DC schemes underlines the need for transparent and
clear communication, noting that the IORP and the Life Directives contain some information
disclosure requirements based on minimum harmonisation, but that national approaches differ.
Consumer testing combined with economic research could be used to improve the quality of
information in terms of clarity and comparability. People should understand the information in order
to make informed choices, especially as pensions have become more complex.

The Green Paper also notes however that national experiences suggest that the engagement rate
that can be obtained through disclosure and financial education has an upper limit. In the view of
the Commission it is therefore important to examine auto-enrolment with opt-out clauses.

Lastly the Green Paper states that informed decisions go along with adequate pension provision.
When making saving decisions it is therefore important that individuals be offered appropriate
options. Member States may consider putting in place a reliable pensions advice service to facilitate
consumer choices.

4. Improving EU statistics on pensions

The Commission calls for streamlining of data about pension systems available from the different
national and EU-level sources to increase their comparability and to save costs. In addition, as
pension funds are important institutional investors whose behaviour could affect financial stability,
an EU methodology for statistics could facilitate a common policy and approach to regulatory

5. Enhancing governance of pension policy at EU level

The Green Paper recognizes that while Member States in principle are responsible for the design and
organisation of their pension systems, some specific areas relating to pensions fall directly within the
EU's competencies. Member States have recognised that acting at the EU level can add value, as
challenges are similar across the EU and reform polices need to be consistent with existing
frameworks, such as the Stability and Growth Pact and Europe 2020.
EU regulation already covers social security coordination relating to pensions. EU coordination must
take an integrated approach to reflect the complexity of pension systems. Good coordination across
the EU level policies and Member States' policies given the increasing economic and financial
integration is also recognized by the Green Paper.

Lastly, the Green Paper notes that pension policy is a common concern for all stakeholders at
national and at EU level. It notes that a common platform for the integrated monitoring of all
aspects of pension policy and pension regulation, combined with stakeholder participation could
contribute to achieving and maintaining adequate, sustainable and safe pensions.

General Questions:

General Questions:
1) How can the EU support Member States' efforts to strengthen the adequacy of pension
systems? Should the EU seek to define better what an adequate retirement income might

2) Is the existing pension framework at the EU level sufficient to ensure sustainable public

3) How can higher effective retirement ages best be achieved and how could increases in
pensionable ages contribute? Should automatic adjustment mechanisms related to
demographic changes be introduced in pension systems in order to balance the time spent
in work and in retirement? What role could the EU level play in this regard?

4) How can the implementation of the Europe 2020 strategy be used to promote longer
employment, its benefits to business and to address age discrimination in the labour

5) In which way should the IORP Directive be amended to improve the conditions for cross-
border activity?

6) What should be the scope of schemes covered by EU level action on removing obstacles for

7) Should the EU look again at the issue of transfers or would minimum standards on
acquisition and preservation plus a tracking service for all types of pension rights be a better

8) Does current EU legislation need reviewing to ensure a consistent regulation and supervision
of funded (i.e. backed by a fund of assets) pension schemes and products? If so, which

9) How could European regulation or a code of good practice help Member States achieve a
better balance for pension savers and pension providers between risks, security and

10) What should an equivalent solvency regime for pension funds look like?

11) Should the protection provided by EU legislation in the case of the insolvency of pension
sponsoring employers be enhanced and if so how?

12) Is there a case for modernising the current minimum information disclosure requirements
for pension products (e.g. in terms of comparability, standardisation and clarity)?

13) Should the EU develop a common approach for default options about participation and
investment choice?

14) Should the policy coordination framework at EU level be strengthened? If so, which
elements need strengthening in order to improve the design and implementation of pension
policy through an integrated approach? Would the creation of a platform for monitoring all
aspects of pension policy in an integrated manner be part of the way forward?

Stakeholder Response:

Response from the Investment Management Association (IMA)

IMA welcomes EU Green Paper and calls for development of cross-border pension products

Commenting on the European Commission's Green Paper on supplementary pensions in the single
market, Richard Saunders, Chief Executive of the IMA, said:

"This is a timely initiative by the Commission. Adequate pension provision is important for
everybody in face of rising longevity and pressure on public finances. Though it is important to
sustain existing private pension provision, the focus of policy needs to be on increasing saving in the
future. To that end, consumers will need accessible and transparent long-term savings products.

While many of the Commission's comments are helpful and pertinent, the apparent conflation of
pension saving with insurance is not. The investment management sector has blazed the trail in
developing truly cross-border products, offering consumers across Europe portability, choice
and significant economies of scale. There is now an opportunity to build on the success of UCITS and
bring new and simpler long term saving vehicles to European consumers. We will be urging the
Commission to seize it."

Response from the European Federation for Retirement Provision (EFRP)

EFRP welcomes open debate on pensions in the EU

The European Commission’s ‘Green Paper towards adequate, sustainable and safe European pension
systems’, published today, was given a broad thumbs up by the European Federation for Retirement

Chairman Angel Martinez-Aldama said “the Commission’s holistic approach consulting on the entire
pension systems of the Member States is to be welcomed and deserves full support. We note that
some ideas promoted by EFRP have found their way into Green Paper. Our Federation will conduct
an intensive dialogue with its Member Associations to provide the Commission with a position that
reflects the opinions of Europe’s pension institutions and their members.”

Chris Verhaegen, Secretary General, said “the Federation has already talked to the Commission to
express EFRP’s support for a full and due consultation process on the pension systems. The Green
Paper provides an opportunity to come to grips with the existing diversity of workplace pension

provision in the EU. Therefore any legislative initiative on issues mentioned in the Green Paper
should only be started after the Commission has drawn conclusions from that Paper.”

The issues raised in the Green Paper constitute a fairly comprehensive survey of the questions to be
considered in modernising pension systems. It is interesting to see the Commission taking up this
debate which could eventually lead to strengthened policy coordination on pensions in the EU. Such
a policy development would be consistent with the attempts of the European Commission to
strengthen economic governance in the EU and especially in the Euro-zone. The recent sovereign
debt crisis illustrated the need for more economic coordination in a monetary union and for
Returning as soon as possible to sustainable public finances in Europe. Public finances are hugely
influenced by pension expenditures. Today these expenditures represent approximately 10% of GDP
in the EU-27 and are expected to further increase due to ageing and a low fertility rate to 12,3% in
2060. In addition to the increase in pension expenditures, Member States will also have to finance
age-related spending on healthcare and long-term care. These costs are expected to increase from
8,1% of GDP to 10,6% of GDP in 2060. Those figures illustrate the magnitude of the issues at stake in
this consultation. The combination of an ageing society, indebted governments and low growth
requires bold policy responses that might lead the EU to reflect more on pension systems as a

Response from the UK National Association of Pension Funds

Joanne Segars, chief executive of the UK National Association of Pension Funds said that, in light of
Europe's "patchwork of very different pension arrangements", a "one-size-fits-all approach" would
not work.

"The EU's suggestion of applying the funding model used for the insurance industry to pensions
would be inappropriate and could cause serious problems," she said.

"And unlike insurance companies, UK pension schemes have access to the ongoing support of the
employer and, if that fails, the Pension Protection Fund."

Response from the Confederation of British Industry

John Cridland, CBI Deputy Director-General, said: “The Commission rightly acknowledges that
working later and saving more for our retirement is inevitable, as more of us are living longer. But
with very different approaches to pensions saving across Europe, national governments should do
most of the work to address this issue.

“We are particularly disappointed by misguided proposals to apply insurance-style funding rules to
pensions. These could force British companies to put about £500bn of extra money into their final

salary pension schemes. The Commission is seeking to treat pensions in the same way that it deals
with insurance schemes – as if they could suddenly face large, unexpected demands on their capital.
In fact, pensions pay out over time in fairly predictable ways.

“Britain already has a well-regulated system thanks to the Pensions Regulator. Applying a “one-size-
fits-all” approach to the EU’s pension schemes would be a mistake. Each of the 27 countries has
different kinds of pension arrangements and the rules would be particularly harmful to Britain’s
remaining final salary pensions. Unlike those in many other countries, the UK’s final salary schemes
are index-linked and rise in line with inflation.”

“The proposals would tie up large amounts of capital in pensions, in low-return assets like gilts and
cash, rather being invested more productively.”

Response from the AGE Platform Europe

Anne-Sophie Parent, director of AGE Platform Europe, a European network of organisations of
people aged 50+, said that “to build public support for these changes, policymakers will need to
demonstrate that they are fully aware of the social impact of the reforms they propose and that they
take the necessary measures to guarantee that everyone will enjoy an adequate pension in the
future, including the most vulnerable.”

She added that “making pensions systems financially sustainable is necessary but not enough. The
reformed systems must also be socially sustainable and adequate for the long-term. This is why we
welcome the focus that the Belgian Presidency is putting on the adequacy of pensions systems and
we hope that this key objective will be shared by all member states.”

Response from the European Trade Union Confederation (ETUC)

General-Secretary John Monks said: "We know the life expectancy is rising but see no evidence that
a higher age of retirement would be matched by employers developing workplaces which encourage
older workers to remain at work," Monks said, stressing that the prevailing philosophy among too
many employers is that older workers are set in their ways to respond to rapidly changing work
environments and should be encouraged to leave early, well below existing statutory retirement

“This makes the Commission's ideas for higher retirement ages look unrealistic. They might more
usefully provide that workers can stay in their jobs until the statutory age.”