EurActiv - Letters to the Editor

Sir,

Regarding ‘Brussels steps up efforts on pension reform‘:

I would like to share with you and your readers my frustration at the lack of common sense demonstrated by the suggested reform.

For that, I would like to refer to a document entitled ‘Interim EPC-SPC Joint Report on Pensions’ that I read some time ago. Prepared by the European Commission (which means – at the European taxpayers’ expense and, supposedly, for their good) at the end of April, until recently the report practically did not exist in the public domain as it was not published on the Commission’s website or any other European institution’s website. However, I was able to find a version of 21.04.2010, available from the website of the European Federation of Financial Advisers and Financial Intermediaries [1].

Having read through the report, I was annoyed by the hinted leitmotiv of increasing retirement age as a panacea to save the pension system. Nevertheless, the document does not explicitly set an increase in the retirement age as an EU-wide objective in the framework of the planned pension system reform, so I exhaled with relief.

But I was really horrified today when I read the following sentence in the finalised report as published at last on the website of the European Commission [2]:

“Growth prospects, appropriate work incentives, open labour markets and increasing effective retirement ages are needed to enable more people to work more and longer.”

Obviously, increasing the retirement age has become an EU-wide objective as part of the planned reform. Moreover, it appears from the report that this increase is the main focus of the proposed pension system reform!

But this reform will be merely a waste of taxpayers’ money as long as it puts the current pension system on a pedestal and sees increasing the retirement age as the panacea to save it!

Here are the two major considerations as to why the current pension system is bound to fail:

a) Designed in the 1880s by Otto von Bismarck to fit entirely different social and demographic picture, the current pension system is simply obsolete!

In very basic terms, when the system was designed, people of active age producing goods and services (producers) significantly outnumbered the people that could not work any more (consumers). And so, with few people benefiting from it for short periods, the system worked.

b) However, there have been significant developments since Bismarck’s time:
– Improved medical care has resulted both in increased survival chances of newborn babies and in an increased average life expectancy, and;
– labour mechanisation has to a great extent eliminated the need for more [farm]hands in the family.

All these factors have led to a decreased birth rate coupled with a growing number of people enjoying increased life expectancy in industrially developed societies. Unfortunately, increased life expectancy does not necessarily mean ‘fit for the job’ and many people over 50 are either not in a physical condition to go on with their job or feel already too tired to work. Instead, they would like to retire and spend some quality time with people of their own interests and, basically, enjoy the rest of their life.

Personally I think that the proposed increase of the retirement age is perverse for one more reason: as acknowledged by the Commission’s report on pensions [2] itself, the unemployment rate among young people is relatively high.

Moreover, looking at the trend in the last century, I expect more jobs to be ‘lost’ to labour mechanisation and, more recently, computerisation, thus leading to even more people of working age ending up without jobs after leaving school. Therefore, with more old people working longer and with less working opportunities, young people are bound to remain unemployed.

The suggested ‘Life-Long Working’ reform does not serve elderly people who would like to enjoy their life at least at its dawn and not fall ‘two feet under’ straight from their workplace, and it certainly does not serve the young people, who it simply leaves unemployed.

So…

What good does the suggested reform at all?!

Last but not least, I would like to ask the masterminds of the proposed reform the following questions:

1. Do they happen to think that people live to work?

2. If more old people work longer, what will the young people of working age do?

Svetoslav Apostolov

REFERENCES:
[1] European Commission. 2010. Interim EPC-SPC Joint Report on Pensions. ARES save number(2010)221924. Version of 21.04.2010.
Available online: http://www.fecif.eu/downloads/FECIF513.pdf (site last accessed on 10.06.2010).

[2] European Commission: Pensions web site:
http://ec.europa.eu/social/main.jsp?catId=752&langId=en (site last accessed on 16.06.2010).

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