Nine EU countries need pension reform

Nine EU countries have not explicitly committed to pension reforms in their recovery and resilience plans despite Commission recommendations on the matter from the 2019 European Semester, according to Commission documents and declarations made to EURACTIV.

In 2019, during the European Semester, 17 EU countries received recommendations on the “long-term sustainability of public finances”, and 15 were urged to specifically reform their pension systems. Some of them were again asked to pursue reforms of the retirement system with the Next Generation EU plan and again in 2022.

Asked by EURACTIV, the Commission considers that only six of the 15 countries have “explicitly” planned to reform their respective pension systems, with the other nine being late – or rather not officially committed. These are the Czech Republic, Germany, France, Ireland, Italy, Luxembourg, Malta, the Netherlands and Poland.

For those member states, reforms would “improve fiscal sustainability”, while they are “identified as posing risks to the sustainability of public finances due to ageing populations,” the Commission told EURACTIV recently.

The Commission considers “they should follow up on the specific recommendations […] and commitments made in their recovery and resilience plans” to “limit the budgetary impact of ageing populations”.

Germany, although it has taken steps to gradually increase the statutory retirement age to 67 by 2031, needs to make “further adjustments” to preserve the system in the long term, according to the Commission. The country is currently debating measures to increase pension amounts and the stability of that amount over time, with Chancellor Olaf Scholz having ruled out any age-related measures during the election campaign.

France has not formalised its plans for pension reform in the budget documents sent to the Commission, but the institution notes the French government’s willingness to carry out an “ambitious reform”, which should notably raise the legal retirement age from 62 to 64 or 65.

But the Commission’s recommendations for France focused mainly on the need to “progressively standardise the rules of the different pension schemes to strengthen the equity of the system while supporting its sustainability” – something the government would also wish to reform.

These special schemes are numerous and allow for earlier retirement or a more advantageous calculation of the pension amount. However, the fate of the reform depends on the consensus that might emerge in parliament, where President Emmanuel Macron’s coalition does not have an absolute majority and needs votes from the right to pass the text.

In the Czech Republic, there is a political will to reform the retirement system in 2023 or 2024 and bring up the retirement age from the current 63 years of age, in line with the Commission’s recommendations, though this has not yet been made official.

Italy, for its part, has “excessive [fiscal and macroeconomic] imbalances”, but the European Semester does not propose further pension reforms, focusing mainly on fiscal recommendations, which could have a better effect. Indeed, the “Fornero” reform, modified in 2019, already established a retirement age of 67.

Some measures that aimed at establishing early retirement mechanisms, implemented under the Conte government at the behest of Matteo Salvini, are supposed to be temporary.

Currently, the Meloni government is working to get the retirement age of 62 or 63, or to guarantee a pension to those who have contributed for 41 years, regardless of their age.

Although, The OECD report ‘Pensions Outlook 2022’, emphasises that in general pension systems in Italy are expected to improve and that the current economic and financial uncertainty we are experiencing and the rising cost of living may lead policymakers and regulators to postpone reforms.

Early retirement is also worrying in Luxembourg and Malta, according to the Commission.

“Reforming preferential pension schemes” is also needed in Poland, according to the Commission, which reiterated its recommendation from 2019 it says remains unsatisfied.

In Poland, special retirement schemes exist depending on the profession. Police officers, journalists and judges, for example, can claim early retirement after 25 years of contributions, compared to an average of 33.6 years for the general population.

For other countries, the EU has not made specific recommendations on the pension system, especially as they already have a retirement age of around 65 – or aim to reach it in the following years. This will be the case in Finland and Bulgaria by 2027, but also in Austria, while in Sweden, the average retirement age is already between 64 and 65.

One of the only exceptions is Slovenia, where the retirement age is 61 years and six months for women, and 62 years and eight months for men, as the country is not planning to put forward any age-related reforms at this stage, nor is it covered by specific recommendations which were already covered in 2019.

Pension reform in the EU is still needed, particularly given the “rapidly rising costs of ageing”, but also “other urgent challenges”, the Commission said, explaining to EURACTIV that “budgetary margins are often insufficient to absorb them in a sustainable way”.

(Davide Basso | EURACTIV.fr)

Source: euractiv.com