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3.10.2019 Kati Kuitto

Providing also future generations of EU citizens with adequate pensions requires a holistic approach. Commonly agreed indicators play a key role in monitoring pensioners’ economic well-being and developing targeted policy measures.

In collaboration with the Ministry for Social Affairs and Health, the Finnish Centre for Pensions organized an international conference in mid-September titled “Pension Adequacy in Europe – Today and Tomorrow”. The conference was a side-event of the Finnish EU presidency and gathered high-level experts from the European Commission, the OECD and research institutions.

The speakers provided a multi-layered picture of Europeans’ pension adequacy in the light of existing comparative social indicators which the EU Member States have agreed upon and which are used when assessing the social protection and social inclusion of EU citizens. Moreover, the need for improvement in both the design of the harmonized indicators and how they can be used more efficiently in policy-making were discussed.

The social dimension and the implementation of the Social Pillar gains momentum in the agenda of the new European Commission. The set of indicators used to monitor the social situation of EU citizens is essential for adjusting the action needed to achieve these goals. The EU social indicators, most of which come in time series and are available via Eurostat, also provide valuable data for comparative research on the causes leading to shortages in pension provision and related consequences.

Blind spots in pension adequacy monitoring

The contributions of the conference made clear that the current pension adequacy indicators have some blind spots. First, the consequences of non-standard careers and self-employment for pension adequacy require closer monitoring. Of the active population in the EU, nearly 40 percent draw their income from temporary and/or part-time employment or are self-employed. Careers of today often include periods of sequential or even simultaneous employment and self-employment, making the consequences of such non-standard careers for pension adequacy hard to foresee for both the persons themselves and the policy-makers.

Second, recent pension reforms have aimed at longer working lives. Accruing an adequate pension requires reaching the (rising) retirement age. However, a considerable proportion of Europeans exit the labour market long before the official retirement age, either because of unemployment, disability or for other reasons, such as caring for fragile relatives. Therefore, we should shed more light on the employability of older workers and health issues leading to disability or career disruptions throughout the life course of individuals. Also, measuring the effective duration of working lives, as well as the effective replacement rates, is important when monitoring the adequacy effects of increasing retirement ages. Designing these indicators in a comparative manner may prove challenging, though.

Third, the costs of medical care and services play an important role in pensioners’ economic well-being and should be considered more closely when assessing adequate old-age income. The division in public and private provision and the costs of care and services vary greatly across the Member States. Once we account for this, the comparative picture of the adequacy of the economic situation in old-age looks quite different across the Member States.

Finally, in addition to country-level developments, there are several important differences between socio-economic, ethnic and other groups within the Member States. The small sample sizes of population surveys, on which most of the EU social indicators are based on, partly hinder analysing the situation of smaller, particularly vulnerable groups such as migrants.

We can only fix what we bring into the spotlight

The contributions of the conference made clear that the importance of reliable data for knowledge-based policy-making cannot be emphasized enough. Comparative data on outcomes, combined with data on policies and institutions, enable learning from both good and bad examples. Applying a holistic approach when assessing pension adequacy also includes comparing the situation of pensioners with that of the working-age population and children. Furthermore, understanding the dynamics that lead to inequalities and shortcomings in pension adequacy requires focusing on the whole life course.

What we measure is also a political issue. Agreeing upon and collecting harmonized indicators involve far-reaching consensus among and a joint effort of the EU Member States. A strong political will for placing new and so-far overlooked edges of pension adequacy into the spotlight is needed. The research community not only profits greatly from existing data but can also help in detecting important topics of pensioners’ economic well-being that require additional measuring tools.

The video recording and the presentations of the conference “Pension Adequacy in Europe – Today and Tomorrow” are available at www.etk.fi/conference2019.

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