Promoting Adequate and Sustainable Pensions through the Open

Promoting Adequate and Sustainable Pensions through the Open Method of Coordination Presentation by the European Commission Tallinn, 12 November 2003 1

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination The Lisbon Strategic Goal: The EU as the Most Competitive and Dynamic Knowledge-Based Economy • March 2000: Lisbon European Council calls for an economy “capable of – sustainable economic growth – with more and better jobs – and greater social cohesion. “ • Depends on successful economic, employment and social policies in the Member States • Policy coordination at EU level through Broad Economic Policy Guidelines, Employment Guidelines and the new ‘Open Method of Coordination’ 2

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination • Step 1: EU defines common objectives (December 2001, Laeken European Council) • Step 2: Member States submit national strategy reports (September 2002) • Step 3: Commission analyses national strategies and drafts joint report (December 2002) • Step 4: Council approves finalised joint report (March 2003) • In parallel: Development of commonly agreed indicators 3

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination: An Integrated Approach • Because adequacy depends on financial sustainability. . . • and reforms for financial sustainability will only be accepted and lasting if adequacy is secured. • Future of pension systems does not depend on pension system design alone • Pension reform, employment policy and public finances must be mutually reinforcing: Streamlined policy coordination at EU level • Avoid intergenerational conflict and ideological debates such as pay-as-you-go vs. funding 4

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives on pensions Adequacy (meeting the social objectives) Financial Sustainability (making sure that we can afford it) Modernisation (adapting to changing needs) 5

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives (I) Adequate Pensions • Ensure a decent living standard so as to prevent poverty and social exclusion in old age; allow the elderly to share in the economic well-being of their country and to participate in public, social and cultural life • Provide access to appropriate pension arrangements necessary to maintain one’s living standard • Promote solidarity between and within generations 6

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives (II) Financial Sustainability Employment • Achieve a high level of employment • Offer effective incentives for labour market participation of older workers Sound Public Finances • Ensure sustainability of public finances Pension Systems • Strike a fair balance between the active and the retired • Ensure the financial sustainability of private pension schemes 7

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives (III) Modernisation of pension systems • Ensure compatibility with labour market flexibility and mobility • Abolish sex discrimination • Increase transparency and predictability of pension systems and their capacity to adapt to changing circumstances 8

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Next Steps: From Now on With the Acceding Countries • Special studies requested by European Council – incentives to work longer – current and prospective replacement ratios – later: regulation of private pension schemes; definedcontributions vs. defined-benefits; gender impact of pension systems • New expenditure projections for mid-2005 • National Strategy Reports by mid-2005 • New joint report for 2006 9

Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Further information All information about the European Union: http: //europa. eu. int The Joint Pension Report and the National Strategy Reports: http: //europa. eu. int/comm/employment_social/socprot/pensions/index_en. htm Reports by the Economic Policy Committee on the budgetary implications of ageing: http: //europa. eu. int/comm/economy_finance/epc_ageing_en. htm 10