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BeeHive  >  BeeLines  >  European pensions round-up

European pensions round-up

Well, apropos nothing, I thought it would be a good idea to summarise one or two of the recent goings-on in Europe on the pensions front. Itís not ĎAll Quiet on the Pensions Frontí, by the way. Quite the opposite in fact.

I find it useful sometimes to step back from where we are in UK pensions and just look around Europe for a bit to get things over here in some kind of perspective. So, and in no particular order, this is what Iíve picked up on from my spies in the last few weeks.....


Regular BeeLiners will remember Iíve gone on at length in the past about the Irish pension reforms (that I admire very much) and the launch over there earlier this year of the new Personal Retirement Savings Accounts (PRSAs). Well, Mary Coughlan, the Social and Family Affairs minister put out a statement a week or so ago admitting that take-up of the PRSAs has not been as good as was hoped for. But itís early days and I note that the Pensions Board (the national regulator in Ireland) has just embarked on a national pension awareness campaign. Like Stakeholder Pensions, PRSAs have to be made available to all employees at their place of work and the thought is that increased awareness combined with easy access will do the trick. Hmm! Where have we heard that before?

Still on the subject of Irish pensions, the Irish Association of Pension Funds (the IAPF) reckon that defined contribution (DC) pension schemes, that currently cover over a quarter of a million Irish citizens, are not attracting anything like the level of contribution required to provide adequate pension levels. The IAPF consider funding levels between 15% and 25% to be about the right mark, but note that the average of contributions (from employers and employees combined) to DC schemes is running at around just 10%.

When I first saw those figures in print I couldnít help but think that they put what we are seeing going on in UK pensions into stark perspective. Here, while itís typical for a defined benefit (DB) scheme to attract total contributions at around 20% of payroll, it seems that a typical DC scheme would be running below the 10% figure experienced in Ireland.


As I reported in a BeeLine earlier in the year, the Dutch Government has been giving serious thought to the problems being brought about through the trend towards earlier and earlier retirement. For some time now itís looked as though there would be a crackdown on early retirement, and now itís happened.

What they have done is to have scrapped the tax-breaks that encouraged people to retire early. Obviously, this hasnít gone down too well with the trades unions and it is possible the move could be challenged by them. The Government, though, considers that without such a move public finances could spin out of control and they seem committed to keeping people in the workforce as long as they can. This was reflected in a speech given by Queen Beatrix at the opening of the current legislative session, when she said ďOlder people must continue to work as long as possible.Ē Oo-err! Itís happening everywhere!

Serbia and Montenegro

Including Serbia and Montenegro, if Iím not mistaken. At the moment the retirement ages for men and women over there are 60 and 55 respectively. But not for much longer theyíre not. The Serbian Government has just announced plans to raise retirement ages by five years on a phased basis, a bit like the way womenís retirement ages are being increased in the UK soon from 60 to 65.

Also, the Serbian Government is proposing changing the way pensions in payment are indexed from the present earnings-related basis to a lower index based on price increases. A bit of a touch of deja vu about that one too, I think. Spooky isnít it?

Czech Republic

The Czech Government has also just announced impending pension reform, the latest in a long line of countries to do so. These have hardly got off the ground yet and already trades unions have organised a mass rally in protest in Prague. It also seems a general strike may be called in November. Nevertheless, the Government appear set on publishing outline detail of the reforms by the end of the year.


Public spending on pensions in Italy, at 15% of GDP, is among the highest in Europe and the Italian Government is set to push through reforms that will increase contribution periods and reward later retirement. Again, this is not exactly popular and trades unions are now threatening strike action because of it. However, the prime minister, Silvio Berlusconi says the country has no choice but to reform its pension system. This is obviously something weíre going to hear more about in the coming months.


Spain already has 7 million pensioners in a population of 40 million and there is general agreement there that reform is necessary. Indeed, the Organisation for Economic Cooperation and Development (the OECD) has called for the Spanish pension system to be reformed. The trouble is, there is a general election due in 2004 and that means the thorny issue of pension reform is effectively off the agenda for the time being.


In contrast to whatís happening elsewhere, the Austrian Government has just had a bit of a pat on the back from the International Monetary Fund (the IMF) for taking a Ďmajor and courageous stepí with its recent pension reforms. What they have done this summer is to have introduced an increase in retirement ages for men and women from 61.5 and 56.5 respectively, to 65 and 60. Again this is being phased in just like here, between next year and 2013.

From 2013, early retirement will not be allowed as far as I can tell, and people choosing later retirement will be well rewarded. I donít know about you, but Iím beginning to spot a trend!


Pension reform is on the agenda in Germany too, but the political balance there is making radical changes difficult to implement. The Government has therefore set out its plans for a conference on reform to include all the major political parties in an effort to build a consensus. A recent academic report on the demographic problems Germany faces recommended the upping of the retirement age to 67 and reducing pension benefits generally. You donít need me to tell you how well that went down.


This soon-to-be European country has its fair share of demographic problems too, and the IMF has suggested they consider adding to the reforms already underway by considering increased contribution levels and making pension saving compulsory for the young. In fact, wherever you look now in Europe it seems the same old issues are cropping up. I suppose itís nice to know itís not just us.

Pensions Directive

Well, to sort of end on a more general point, the European Directive on Pension Funds that I wrote about a few times earlier in the year is now officially on the Statute book youíll be pleased to hear. Directive 2003/41/EC hit the ground running on the 23rd of September and is now EU law. Countries now have two years to implement the Directive, so you can be sure youíll hear more from me on this in the future as things develop. For now, though, Iíll let you get on with whatever it was you were doing before I so rudely interrupted you by popping up on your computer screen. Ciao!

Steve Bee
2 October 2003

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