Thursday, July 08, 2010

European Commission Calls for Pension Reform including Raising Retirement Age

The European Commission has called on European governments to raise the retirement age because workers are living longer and their pension systems could implode. This is just one part of a broader Green Paper on "towards adequate, sustainable and safe European pension systems" (English).

The Commission found that the fact that less than 50% of people are still in employment by the age of 60 goes against commitments made at the Barcelona European Council to postpone the age at which people stop working by five years and is inconsistent with the objective of reaching the Europe 2020 75% employment rate target.
On present trends the situation is untenable. Unless people, as they live longer, also stay longer in employment, either pension adequacy is likely to suffer or an unsustainable rise in pension expenditure may occur. The impact of the demographic challenge as aggravated by the crisis will tend to reduce economic growth and put pressure on public finances. The 2009 Ageing Report7 showed that, on account of the shrinking labour force, the only source of growth by 2020 will be labour productivity.
The report acknowledges that some European countries have already raises the eligibility age for a full pension in their public pension schemes, and that there is a growing awareness that this represents an important signal to workers and employers, which motivates them to aim for higher effective retirement ages. In addition, some countries have set an automatic adjustment that increases the pensionable age in line with future gains in life expectancy.

The EC has established a consultation and is seeking comments at its dedicated website on the Green Paper. It will analyze all responses and consider the best course for future actions to address these issues at EU level.

Source: European Commission News Release (July 7, 2010)

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