1 Promoting Adequate and Sustainable Pensions through the Open Method of Coordination Presentation by the European Commission Tallinn, 12 November 2003

2 The Lisbon Strategic Goal: The EU as the Most Competitive and Dynamic Knowledge-Based Economy March 2000: Lisbon European Council calls for an economy capable of –sustainable economic growth –with more and better jobs –and greater social cohesion. Depends on successful economic, employment and social policies in the Member States Policy coordination at EU level through Broad Economic Policy Guidelines, Employment Guidelines and the new Open Method of Coordination Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination

3 The Open Method of Coordination Step 1: EU defines common objectives (December 2001, Laeken European Council) Step 2: Member States submit national strategy reports (September 2002) Step 3: Commission analyses national strategies and drafts joint report (December 2002) Step 4: Council approves finalised joint report (March 2003) In parallel: Development of commonly agreed indicators

4 Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination The Open Method of Coordination: An Integrated Approach Because adequacy depends on financial sustainability... and reforms for financial sustainability will only be accepted and lasting if adequacy is secured. Future of pension systems does not depend on pension system design alone Pension reform, employment policy and public finances must be mutually reinforcing: Streamlined policy coordination at EU level Avoid intergenerational conflict and ideological debates such as pay-as-you-go vs. funding

5 Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives on pensions Adequacy (meeting the social objectives) Financial Sustainability (making sure that we can afford it) Modernisation (adapting to changing needs)

6 Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Common objectives (I) Adequate Pensions Ensure a decent living standard so as to prevent poverty and social exclusion in old age; allow the elderly to share in the economic well-being of their country and to participate in public, social and cultural life Provide access to appropriate pension arrangements necessary to maintain ones living standard Promote solidarity between and within generations

7 Common objectives (II) Financial Sustainability Achieve a high level of employment Offer effective incentives for labour market participation of older workers Employment Sound Public Finances Pension Systems Ensure sustainability of public finances Strike a fair balance between the active and the retired Ensure the financial sustainability of private pension schemes Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination

8 Common objectives (III) Modernisation of pension systems Ensure compatibility with labour market flexibility and mobility Abolish sex discrimination Increase transparency and predictability of pension systems and their capacity to adapt to changing circumstances

9 Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Next Steps: From Now on With the Acceding Countries Special studies requested by European Council –incentives to work longer –current and prospective replacement ratios –later: regulation of private pension schemes; defined- contributions vs. defined-benefits; gender impact of pension systems New expenditure projections for mid-2005 National Strategy Reports by mid-2005 New joint report for 2006

10 Promoting Adequate and Sustainable Pensions in the EU: The Open Method of Coordination Further information All information about the European Union: The Joint Pension Report and the National Strategy Reports: prot/pensions/index_en.htm Reports by the Economic Policy Committee on the budgetary implications of ageing: