Out-Law News 2 min. read
20 Feb 2012, 9:37 am
Its new White Paper (40-page / 304KB PDF) also suggests establishing a 'cross-border pension tracking service' to make it easier for workers to move between member states without losing track of their pension rights.
Although individual EU states are largely responsible for their own pension systems, the EU can help with legislation affecting internal markets, provide financial support for helping older workers and assist in policy coordination.
Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the paper was "written in the context of an ageing European population putting strains on already stretched national budgets".
"We shall have to wait and see how the UK Government chooses to respond to this White Paper - it is likely to claim that it has already made headway in many of these areas such as restricting access to early retirement, closing the pensions gap between men and women and encouraging private pension saving through auto-enrolment," he said.
There are 120 million pensioners in the EU, representing 24% of the population, according to Commission figures. The provision of pensions currently represents 10% of public expenditure, a figure which is set to grow as the ratio of people of working age to citizens aged 65 or over continues to fall.
EU Commissioner László Andor said that a recent Eurobarometer survey had shown that many European workers would work past the national state pension age if the conditions were right.
"Ensuring adequate pensions for the future is possible if we follow through on our commitments to reform. The impact of aging is upon us – the baby-boomers are retiring and fewer youngsters are entering the labour market. But it isn't too late to meet these challenges," he said.
Proposals to phase out early retirement schemes and raise the pension age will only work if accompanied by "appropriate health, workplace and employment measures" that enable people to stay longer in the labour market, the White Paper said.
It suggests using the European Social Fund, the EU's main financing method for supporting employment in member states, to bring older workers into work and encourages member states to link national retirement ages with life expectancy. Member states could also take into account a worker's contributory period where relevant, or allow employers to offer alternatives such as job mobility to workers in "particularly arduous or hazardous" roles.
Eighteen member states will have equalised their retirement ages for men and women by 2020, the Commission said, while another five had longer term plans in place to do so. In the UK, the retirement age for women will rise to match that of men from 2018 before it rises to 66 for both sexes in October 2020.
The White Paper suggests efficient and cost-effective "tax and other incentives" should be better targeted to individuals who would "otherwise not build up adequate pensions", and says that the Commission intends to offer "financial support" to member states who do not already have cost-effective supplementary pension provision from this year. In the UK, employers will have to start auto-enrolling their workers into a pension scheme which meets minimum requirements from October.
The Commission has also proposed a pilot project which will allow pensions to be tracked between member states, as well as promising to promote the development of national tracking services allowing employees to keep track of their pension entitlements acquired between different jobs. It will also look at how cross-border transfers of pension capital are currently taxed, including whether the any "discriminatory tax obstacles" currently exist and considering how to reduce the risk of transfers being double-taxed.
Pensions law expert Simon Tyler expressed his concerns that a new cross-border service would prove unnecessarily burdensome.
"Although much in this White Paper makes sense, many in the pensions industry will question the wisdom of setting up an EU tracking service. This is likely to be costly and will double up on data already provided by national tracking services," he said.
