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BeeHive  >  BeeLines  >  Euroguru

Euroguru

Well, I’m really getting into this European pension thing. Regular BeeHive readers will know I was on about the new Irish pension reforms following my short break in the Emerald Isle a week or two ago and, of course, we all got quite worried about our tax-free cash back in March when the European Parliament started discussing the draft EU pension fund Directive. There’s no doubt about it, we’re going to hear more and more about European pensions issues as time goes on, so I’ve decided to get into EuroGuru mode. If you’re interested in the topic you may like to hear about some of the issues I’ve been picking up on over the last day or so, particularly from my spies at the World Pension Summit over in Dublin.

Mary Coughlan, the Irish Social and Family Affairs Minister, told the conference that the recently launched low-cost Personal Retirement Savings Accounts (PRSAs) had got off to a good start, and that the Irish Government is “working extremely hard to increase pension coverage by the voluntary route”. This is quite an important statement, because the deal with compulsion in Ireland is that the new system of PRSAs has been given just three years to prove it can work before compulsory contributions are seriously considered.

Pensions are a big issue in France at the moment too. I don’t know if you know it yet, but French trade unions are set to strike on Tuesday May 13th in protest against the French Government’s pension reforms. What the French Government is looking to do is to increase the length of time public sector employees have to work to get a full pension from 37.5 years to 40 years. They propose to introduce this change in 2008. A survey by the newspaper ‘Le Figaro’ shows that 43% of the population are against an increase in the length of the contributory period, so it looks like a bit of a toughie. Pensions are so important in France at the moment that the labour minister, Francois Fillon, went on TV recently to explain the need for the pension reforms in a programme entitled “100 minutes to convince the nation”, or something like that.

In Germany too there have been calls this week for pension saving to be made compulsory if the Reister-Rente private pensions don’t take off in the next two years. There are also calls in Germany from the Welfare Reform Commission for the state pension age to be raised from 65 to 67 in 2011. You won’t be surprised to hear that a survey carried out by the ‘Welt am Sonntag’ newspaper found that 86% of the people surveyed weren’t happy with that.

And, as if that’s not all depressingly familiar, I have today found that all is not well with Belgian pensions. Regular BeeHive readers will doubtless know that Mrs Bee hails from Brussels and we’ve got loads of relatives over there (one of her cousins works at a senior job in their version of OPRA in fact. I thought you’d like to know that.) Anyway, what’s happening in the land of mussels and chips is that some of the public pension schemes over there are structured in such a way as to make early retirement a no-brainer. The Organisation for Economic Cooperation and Development (OECD) has just published a report saying that Belgium needs to reform its public pension system. The problem is the old-age pension fund over there, les fonds de vieillissement no less, may not be up to dealing with the pressures of a declining work force and an ageing population that has unrealistic expectations of early retirement. It is estimated that by 2050 the number of people in Belgium aged 65 and over will be 50% of the number of people between 20 and 64. So the workforce will only outnumber pensioners two to one, and in the words of the report “there will need to be a massive transfer of income from workers to pensioners to cover additional pension costs”.

So, it’s worth bearing in mind, as we grapple with the day-to-day complexities of the changing UK pension system, that the same problems we face are popping up all over Europe too. Pension policy is clearly going to be a key European issue over the next forty years or so.

Steve Bee
1 May 2003

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