the second annual european pensions conference anne maher chief executive20 april 2004 the pensions...
TRANSCRIPT
THE SECOND ANNUAL EUROPEAN THE SECOND ANNUAL EUROPEAN PENSIONS CONFERENCEPENSIONS CONFERENCE
ANNE MAHERChief Executive 20 April 2004The Pensions BoardIreland
A PENSIONS ROLE MODEL A PENSIONS ROLE MODEL FOR EUROPE?FOR EUROPE?
2.
WHAT I WILL COVERWHAT I WILL COVER
Current European models
Influences on suitability of model
Does/should EU want a model?
3.
Four pillars social security supplementary pension schemes individual saving earnings in retirement
Huge diversity in EU member state modelsSome models planned but most evolvedDifferences arise from different
political tendencies cultural influences social traditions employment traditions external events e.g. war
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
4.
UK/Ireland/Netherlands ModelSouthern European Model Central and Eastern European ModelVarious Other Unique Models, for example
Germany France Denmark Sweden
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
5.
UK universal flat-rate basic social security pension mandatory additional earnings-related social security
cover minimum income guarantee long tradition of funded occupational pension schemes personal pensions and stakeholder pensions
Netherlands universal flat-rate safety-net social security pension extensive complementary funded pension schemes high proportion of industry wide schemes
Ireland universal basic flat-rate social security pension large number of funded occupational pension schemes personal pensions and Personal Retirement Savings
Accounts partial funding of social security pension through National
Pensions Reserve Fund
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
6.
Southern European (Italy, Greece, Spain, Portugal) extensive First Pillar social security covers
retirement, death and disability social security funded on PAYG basis social security usually earnings related up to high
earnings ceiling very little private Second Pillar provision because
unnecessary
Central and Eastern European comprehensive social security pensions on PAYG
basis low retirement ages are serious issue complementary pensions are new phenomena
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
7.
Other Unique ModelsGermany
First Pillar at level which encourages employers to establish private schemes
private occupational schemes but mostly book reserves (with insolvency insurance) rather than funded
France Second Pillar complementary pension schemes PAYG operated on industry wide basis compulsory for most employed people based on concept of solidarity very few private funded occupational schemes
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
8.
Denmark flat-rate First Pillar based on residence and financed
out of general taxation funded private pensions negotiated by industry,
financed by specialised pension insurance companies
Sweden PAYG defined benefit First Pillar recently transformed
into notional defined contribution scheme employees must also contribute to funded pension
arrangement other forms of complementary pension
arrangements also common
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
9.
Issues Arising Demographic changes
Falling birth rate Longer life expectancy Increasing old-age dependency
Pressure on public finances Pension cost increasing as % GDP IMF, ECB, and OECD calls for reform
Pension system sustainability in EU Some have private funded pensions Threat to monetary union
Common Debates Funding of public and private pensions Mandatory or voluntary supplementary pensions Defined benefit or defined contribution Appropriate fund investment
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
10.
Pension Reform High priority in every EU countryReforming Social Security
Increasing retirement age Part-time working as transition Changes in early exit Lowering replacement ratios
Developing occupational pensions Tax incentives Prudential rules Transfer rights
Developing individual pensions Market development Tax incentives Information campaigns
CURRENT EUROPEAN MODELSCURRENT EUROPEAN MODELS
11.
Adequacy Prevent social exclusion in old age Allow people to maintain living standards Promote solidarity between generations
Financial sustainability of pension systems Raise employment levels Extend working lives Ensure sustainable pensions in context of sound public
finances Adjust benefits and contributions so as to share financial
consequences of ageing in balanced way between generations
Ensure that private pension provision is adequate and financially sound
Responding to changing needs Adapt to more flexible employment and career patterns Meet aspirations for greater gender equality Make pension systems more transparent and demonstrate
ability to meet challenges
INFLUENCES ON SUITABILITY INFLUENCES ON SUITABILITY OF MODELOF MODEL
12.
EU Says NoCommission regularly confirms principle of
subsidiarity saying that Member States retain full responsibility for organisation of their pension systems and for role of each of Three Pillars of pensions in their
system.
EU commitment is to full internal market for financial services, including internal market for occupational retirement
provision organised on European scale.
DOES EU WANT MODEL?DOES EU WANT MODEL?
13.
EU Says No But … Pensions Directive
Protection of members Freedom of investment First step to Single Market for pensions
Tax Co-ordination European Court cases Tax Communication Current moves to enforce
Joint Commission/Council Report on Adequate and Sustainable Pensions Evaluates adequacy, effectiveness, financial sustainability
and responding to changing needs Other Areas of Interest
Mobility and portability Equality
DOES EU WANT MODEL?DOES EU WANT MODEL?
14.
No becauseAll Member States starting from very
different positionsDifferent
demographics economies cultures
Too inflexibleWould lack opportunities for creativity and
developmentNo single model could suit all
SHOULD EU WANT MODEL?SHOULD EU WANT MODEL?
15.
No butMember States need common understanding
of each others systemsStatistics, measurement and evaluation must
be based on commonly accepted basics (for example, measurement of funding)
Supervision must operate with strong cross-border co-operation
SHOULD EU WANT MODEL?SHOULD EU WANT MODEL?
16.
We are on the brink of Cross-border pensions and Pan European pensions
Some synchronization and common agreements will be needed
It is a time of change and opportunity for pensions
But we should all retain our separate national pension
models.
CONCLUSIONCONCLUSION