Comment: EU pension age plan lacks credibility
The EU Commission has proposed that state pension ages should rise in all member-states in accordance with increasing life expectancy. Yet while the idea has ostensible common-sense value, a closer look reveals various, intractable difficulties, and the possibility of inequitable outcomes.
By Craig Berry
Let us get one thing straight from the start: the EU Commission has no power over state pension ages, nor is there any likelihood that it will acquire such jurisdiction.
Furthermore, there are no clear reasons for harmonisation of state pension ages at the European level. The EU probably felt like it had to react to the accusation that Eurozone countries were paying for privileged Greek pensioners to retire at younger ages than everyone else, but these proposals have a lot more to do with convincing international speculators about the future viability of the Euro than a serious plan for pensions policy.
The Greek fiscal crisis, like the UK’s, was caused by a variety of factors, chiefly the global financial crisis. Pensions were a contributory factor – but public sector pensions much more so than state pensions. Greece’s state pension age is 65 for men, and 60 for women – as in the UK. And like almost every other EU member, there are plans to both harmonise and increase the state pension age.
The Commission’s plans have very little to do with longevity. They are based solely on fiscal reasoning. Why else would have a Commission official have stated that “we are just going to have to accept that every one of us, we’re all going to have to work longer”? Longevity has increased across Europe, but how do we know for certain this will continue? Will the plans allow for state pension ages to fall if, for instance, the obesity timebomb causes life expectancy to recede?
Longevity has also increased extremely unevenly. The poorest countries within Europe, and even the poorest groups within wealthier countries, have much lower life expectancy than the national or continental averages. If longevity is to set the pace, will the state pension age be means-tested?
There is also a staggering absence in the Commission’s thinking on how we will work for longer. The implication is that older people are refuseniks who will only work under the threat of financial compulsion. This is simply not the case. Evidence points to a desire to stay in employment for longer among older people – if there are suitable jobs and necessary training programmes available.
A similar neglect is evident in the UK government’s plan to raise the state pension age faster than currently planned. Increasing it to 66 for men by 2016 – instead of by 2026 – will affect people already in their 50s. It will also reintroduce gender inequality in the UK pensions system by the back door, because female state pension age will not even reach 65 until 2020.
Ironically, the plan could be scuppered by the EU’s own rules on equal treatment of men and women. It also flies in the face of the longevity zeitgeist peddled by the government and the EU Commission: male life expectancy is significantly lower than female life expectancy. There is a case for increasing state pension ages in Europe, but it has not yet been convincingly made.
Craig Berry is a senior researcher at the International Longevity Centre-UK and a former policy advisor at HM Treasury
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