European Commission technocrats must have been in a trolling mood when they wrote the Pensions Adequacy Report 2018. They raise concern about the cuts in pensions and low-pensioners benefits they demanded from Greece to implement in the context of the 3. bailout as “all these provisions are expected to have a negative impact on the adequacy of pensions, especially for low-income pensioners.” But EU technocrats’ main concern about the sustainability of the Greek pension system is that the country has “the highest rates of population ageing among the EU-28, along with very high unemployment rates.”
The European Union Pensions Adequacy Report 2018 published on Monday analyses how current and future pensions help prevent old-age poverty and maintain the income of men and women for the duration of their retirement.
“Today, there are 1.9 million fewer older Europeans at risk of poverty or social exclusion than a decade ago, while the number of older workers in employment has increased by 4.1 million in the last three years alone. Despite these improvements in the situation of Europe’s pensioners, there is no room for complacency,” the report notes among others..
According to the report, today some 17.3 million or 18.2% of older people (aged 65 and over) in the EU remain at risk of poverty or social exclusion. This amount has remained nearly unchanged since 2013. In addition, significant differences between countries and population groups remain. For instance, women’s pensions are still 37% lower than men’s due to lower salaries and shorter working lives linked to caring responsibilities. Similarly, people in non-standard or self-employment often face less favourable conditions for accessing and accruing pension rights than those in standard employment. The risk of poverty and social exclusion in old age also increases with age. More than half of all older people at risk of poverty or social exclusion in the EU are aged 75 or over. This is due to the fact that while needs increase with age, the value of pensions decreases during retirement.
For Greece, the report mentions that “the 2016 pension reform is considered to be the most crucial reform of the pension system since its establishment,” since it “entails important redistributive elements, which are expected to have a positive impact on future pension adequacy.”
In spite of the successive cuts imposed over the period 2010-2016, pensions in Greece, it said, have played a vital role in preventing older persons from falling into poverty.
The at-risk-of-poverty or social exclusion rate of people aged 65+ has decreased by 6.1 percentage points from 28.1 percent in 2008 to 22 percent in 2016 (against 35.6% of the total population in 2016).
According to the relevant OECD projections, future pension adequacy in Greece is ensured, in the long run, through the application of a higher future gross pension replacement rate for low-earners than the respective one for average-earners.
But the report adds that ensuring adequate pensions for non-standard workers with short working careers and low earnings remains a challenge that needs to be addressed.
The report raised concerns about the future adequacy of pensions in Greece in the short run, given the recently adopted provisions of Law 4472/2017, which entail, among other things:
(a) a reduction of up to 18 percent for each pension in payment (contributory and auxiliary) to be put into effect from January 2019; (b) the freezing of existing pensions at current levels until the end of 2022; and (c) the abolition of EKAS (the social solidarity benefit) by the end of 2019.
All these provisions are expected to have a negative impact on the adequacy of pensions, especially for low-income pensioners.
“The main concern of the pension system in Greece remains its sustainability, given that the country exhibits one of the highest rates of population ageing among the EU-28, along with very high unemployment rates.”
Nevertheless, among the main issues regarding the sustainability of the pension system is how to secure financial viability along with social effectiveness that would ensure, among other things, pension adequacy.
In this respect, it is imperative that the full accomplishment of the 2016 pension reform guarantees a decent level of benefits under the constraints posed by the level of economic growth together with the level of primary budget surpluses. Moreover, efforts should be concentrated on addressing specific pension-related challenges, such as: economic recession, high unemployment, non-standard employment, undeclared work and contributions evasion, the report concluded.
In general, the EU report urges member states that have put measures to safeguard adequacy of pensions more prominently at the heart of their policy efforts, in particular for low-income pensions, that “more needs to be done.”
To ensure the adequacy and sustainability of current and future pensions, pension systems need to promote longer working lives, in accordance with continuously increasing life expectancy.
This can be done by encouraging life-long learning, providing a safe and healthy work environment, adjusting pensionable ages, rewarding later retirement, and discouraging early exit.
Flexible working options, including the possibility to combine pension with income from work, and tax incentives promoting later retirement are becoming increasingly widespread and will continue to be important.
European Union technocrats confirm for one more time that they live in a rosy bubble in Brussels and
1) have no idea about real world life and how the labor market treats labor craft over 50. In Greece already over 40, not to say over 35!
2) pretend they know nothing about the pensions and EKAS cuts in Greece when it was the same European creditors who pushed for those cuts. Not to forget that the IMF demand for the further pension cut as of Jan 2019 (see above) was gladly adopted and approved by the European Commission that was pressing the Greek government: Accept or Forget the 2. review.
3) one more proof that the left hand of the EU Commission is not aware of what the right hand does is that the report mentions the “high unemployment” as a factor risk for the Greek pensions system, but forgets the ridiculous low wages that lead to inevitable low pension contributions.
I remember I had mentioned right away in 2012, that high unemployment and low wages will bring the Greek pension system into collapse. But it was all about creditors’ pressure to Greece.
PS Glad the EU report did not propose to get rid of Greeks over 80….