Select Committee on European Scrutiny Second Report



COM(01) 362

The Social Protection Committee's report on the sustainability of pensions.

Commission Communication: supporting national strategies for safe and sustainable pensions through an integrated approach.

Legal base:
Documents originated: (a) 18 May 2001
(b) 3 July 2001
Forwarded to the Council: (a) —
(b) 6 July 2001
Deposited in Parliament: (a) 20 June 2001
(b) 13 July 2001
Department: Work and Pensions
Basis of consideration: (a) EM of 18 June 2001
(b) EM of 8 August 2001
Previous Committee Report: None; but see (22157) 6457/01: HC 28­xii (2000­01), paragraph 11 (25 April 2001)
To be discussed in Council: (a) Discussed on 15-16 June 2001
(b) December 2001
Committee's assessment: Politically important
Committee's decision: (Both) Cleared


30.1 The Social Protection Committee (SPC) was mandated by the Lisbon, Feira, Nice and Stockholm European Councils to undertake a study of the sustainability of pensions. The SPC's preliminary study was cleared by our predecessors in April 2001.[77]

The documents

30.2 Document (a), the SPC's final report, sets out the general principles of and the challenges facing pension systems in Member States. Although it does not offer precise proposals, it identifies three challenges that the SPC considers need to be met if pension systems are to remain sustainable in the long term:

  • safeguarding the capacity of pension systems to meet their social aims;

  • maintaining the financial sustainability of pension systems; and

  • increasing the ability of pension systems to respond to the changing needs of society and individuals.

30.3 The report suggests that the growing imbalance between the number of those in employment and the number of pensioners will need to be addressed in any strategy for improving the sustainability of pension schemes. As noted above, the report provides no specific proposals for reform of pensions, but it does call on Member States to co-ordinate their efforts and exchange views and information on enhancing the sustainability of their pension schemes, in an approach it calls the "open method of co-ordination." The report was presented to the European Council at Goteborg in June 2001.

30.4 Document (b) sets out proposals for improving co­ordination between Member States in modernising pension systems. The Minister says the document:

    "outlines a process that would require the setting of common objectives, translating these objectives into national policy strategies and finally, as part of a mutual learning process, periodic monitoring on the basis of commonly agreed and defined indicators. The document suggests potential objectives centred around three main areas: adequacy of pensions, financial sustainability of public and private pension schemes and modernisation of pension schemes. This process would be integrated into parallel work being conducted by ECOFIN."

30.5 Figure 2 (appendix) sets out the next steps in the proposed process. A key feature of the process will be the publication by Member States of the first National Strategy Reports by July 2002. The Commission outlines the purpose of these reports:

    "The reports should contain a strategic statement and focus on reforms undertaken, or envisaged, to meet the common objectives. They should be supported by commonly agreed indicators, and, where appropriate, national targets could be usefully included.

    "Drawing on the information provided in the national strategy reports on the sustainability of pensions, the Commission would present a report assessing the national strategies and identifying good practice and innovative approaches, as a contribution to a joint report to be agreed jointly by the Commission and the Council. The timing of this joint report should allow for its conclusions to be included in the synthesis report to be discussed at the Spring European Council in 2003 in accordance with the Lisbon process.

    "The first national strategy reports to be prepared in 2002 should be updated as appropriate in subsequent years, highlighting new developments in national strategies and progress made in implementing them. In 2005 a major review should be carried out on the basis of the latest available data and following a dialogue with all relevant actors."

The Government's view

30.6 The Government broadly welcomes document (a), which it says recognises the diversity of approaches adopted by Member States and emphasises the fact that pension systems are the responsibility of individual Member States. The Government particularly welcomes the recognition that the report gives to the work being undertaken by the Economic Policy Committee and the Employment Committee on financial sustainability and employment. It is the Government's view that such work should be conducted jointly between the Committees.

30.7 As regards document (b), the Government broadly endorses the open method of co-ordination, while having reservations about what it sees as an "ambitious proposed timetable and the heavy, bureaucratic nature of the process proposed". The Minister of State for Work at the Department for Work and Pensions (Mr Nicholas Brown) says:

    "The current timetable proposed is particularly ambitious with initial objectives being agreed in a joint progress report with the EPC to be presented at the European Council at Laeken in December 2001. It is envisaged that this would go before the relevant Councils in December. Full agreement should be achieved in time for the Spring 2002 Council in Barcelona."

30.8 The Minister says there will be opportunity to comment on and influence the proposal before it is put to the Employment and Social Policy Council for adoption in December. He says:

    "The UK Government would wish to see sustainability as the overarching objective for pension systems, together with greater recognition of the importance of keeping people in the labour market for longer. Among the objectives suggested by the Commission, the UK would wish to see added an objective on the portability of pensions and the completion of the single market in financial services.

    "Work on the adequacy and sustainability of pensions is currently being taken forward by both the Economic Policy Committee (EPC) and the SPC. The UK has been strongly supportive of moves to ensure the longer­term financial sustainability of pension systems in the Member States through the work of the EPC. The Commission proposal recognises the importance of both committees jointly proceeding with work on pensions. This is in line with UK Government policy."


30.9 Pension systems are clearly the responsibility of individual Member States. However, we recognise that there may be some benefit in requiring Member States to exchange information on their pension provision so that best practice can be disseminated. The process for doing this needs to be flexible and should not impose unnecessary burdens on Member States. We share the Government's reservations that the Commission has proposed a process and timetable that may be "ambitious", "heavy" and "bureaucratic", and we support the Government's efforts to make the approach as flexible as possible.

30.10 We clear the documents.

77  (22157) 6457/01; see headnote to this paragraph. Back

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