Documents considered by the Committee on 15 September 2010 - European Scrutiny Committee Contents

7   Pensions Green Paper



COM(10) 365

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Commission Green Paper: Towards adequate, sustainable and safe European pension systems

Commission staff working document: description of EU legislation concerning pensions

Legal base
Document originated7 July 2010
Deposited in Parliament14 July 2010
DepartmentWork and Pensions
Basis of considerationEM of 26 July 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


7.1  Member States are responsible for establishing their national pensions framework and, as a result, there is considerable diversity in the types of pensions schemes available in each Member State. Some aspects of pension provision are covered by EU legislation. So, for example, EU law on the co-ordination of social security systems enables pensioners who have paid into a statutory scheme in one Member State to receive their pension when resident in another Member State. EU prudential rules, which seek to ensure that pension fund or life assurance providers are financially sound, apply to some (but not all) occupational pension schemes. EU rules on insolvency provide some protection for employees' pension rights. EU legislation on financial services has sought to standardise the provision of pre-contractual information to enable investors to make informed choices.

7.2  There are many other areas of EU activity that have an impact on pension provision. These include the internal market, especially rules on the free movement of labour, services and capital; the Stability and Growth Pact, which may constrain public expenditure on pensions; and the Europe 2020 Strategy for jobs and sustainable and inclusive growth which sets a 75% employment target for those in the 55 to 65 age group and advocates the long-term sustainability of public finances.

The Green Paper

7.3  The purpose of the Green Paper is to launch a debate "on the key challenges facing pension systems and how the EU can support Member State efforts to deliver adequate and sustainable pensions".[15] The Commission identifies the following challenges:

  • a rapidly ageing population which will increase public expenditure on pensions, health and social care;
  • reform of national pension systems to keep people in work longer and to provide greater choice of pension schemes;
  • the impact of the financial and economic crisis — notably rising unemployment, lower growth, higher national debt, and financial market volatility — on the provision of adequate and sustainable pensions.

7.4  The Commission suggests that ensuring the adequacy and sustainability of pension systems should serve as the overarching objective of pension reform. The Green Paper invites responses from all interested parties to 14 questions which seek to clarify what role the EU should play in supporting Member States to achieve this objective. Some of the questions are general in nature, others are detailed and specific, suggesting the amendment of existing legislation.

7.5  The questions are grouped under the following headings:

  • adequacy and sustainability — should the EU seek to define what an adequate retirement income might entail, and is the existing pension framework at EU level sufficient to ensure sustainable public finances?
  • achieving a sustainable balance between time spent in work and in retirement — what role should the EU play, for example, in extending working lives, tackling age or other forms of discrimination in the labour market, and raising pensionable ages?
  • removing obstacles to mobility in the EU — should, for example, the scope of application of existing EU measures be extended to include a wider range of pension schemes, or changes be introduced to stimulate greater cross-border activity, and is there a need for special provision (such as a cross-border EU pension fund) for mobile workers to overcome difficulties with the transfer of pension rights from one Member State to another?
  • ensuring safety and transparency in pension provision — should the EU seek to close gaps in existing EU regulation, consider the scope for further EU action to achieve a better balance between risks, security and affordability for pension providers and beneficiaries, and improve rules on the solvency of pension funds and the protection of employees in the event of employer insolvency?
  • improving the provision of information to enable informed choices — should the EU seek to develop a common approach on the information to be provided about pension schemes and define "desirable features" to help inform decisions about the most appropriate scheme?

7.6  The Commission's final question goes to the nub of the Green Paper by asking whether there is a need to strengthen policy co-ordination on pensions at EU level and, if so, how best to achieve "an integrated approach" involving all stakeholders — public authorities, social partners, industry and civil society — in designing and implementing future pension policy. The Commission invites responses to the questions set out in its Green Paper by 15 November.

The Government's view

7.7  In his Explanatory Memorandum of 26 July 2010, the Minister of State for Pensions (Steve Webb) notes that that the Green Paper is a consultative document and therefore has no immediate legal, financial or policy implications for the UK. He says that, in its response to the Commission's consultation, the Government will stress the importance of the subsidiarity principle and that "pensions policies should generally be at national and not European level but that improved indicators, reporting and information sharing at European level could be helpful".[16]


7.8  The Green Paper provides a useful analysis of the challenges facing pension systems across the EU and raises an important question about whether, and how, the EU should respond to them. We agree with the Minister that subsidiarity should be the guiding principle in determining an appropriate role for the EU. We should be grateful for a copy of the Government's written response to the questions raised in the Green Paper. Meanwhile, we shall keep the Green Paper under scrutiny.

15   Introduction to the Green Paper, fifth paragraph. Back

16   Minister's Explanatory Memorandum, page 2, para 9. Back

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