The European Commission has published 27 country-specific recommendations on economic growth and employment for each of its member states.

For most countries the employment rate of older workers can be drastically improved, which is recommended by the EC to ensure that pension costs remain sustainable. The retirement age for women is often lower than that of men, something which should be equalised, according to the Commission.

In Austria for instance, 72% of all new pensions in 2010 were granted before the statutory retirement age was reached, while the retirement age for women is 60. The Commission recommends that Belgium should make the access criteria for early retirement more stringent, in order to encourage older workers to stay within the active labour force.

Apart from discouraging early retirement, the EC also recommends member states such as Finland, the Netherlands and Belgium to ensure the retirement age rises in line with longevity. Luxembourg should propose and implement a broad pension reform to ensure the long-term sustainability of the pension system, while countries like Bulgaria, Lithuania, Slovakia and Spain should adopt, implement or speed up their recently introduced pension reforms.

In Luxembourg the short-term financing of the pension system is currently supported by a low old-age dependency ratio and depends in part on the contributions paid by the relatively young population of cross-border workers. However, the EC said that in future both factors will reverse and pension costs will increase substantially. Although the government has accumulated sizeable assets and pension reserves are still growing, these will not be sufficient to ensure the sustainability of the system.

The EC also recommended the Czech Republic to introduce pension reforms, focusing firstly on improving the first pillar, but also to encourage saving for private pensions. The Czech Government has put forward two sets of proposals. The first targets the public pay-as-you-go system and includes an increase in the statutory retirement age to 67 years for men and women in 2041. The second package of measures still needs to be approved by Government, and would consist of introducing a voluntary second private pillar in 2013.

Meanwhile, Denmark and Finland should reform their disability pensions, while France needs to take further measures to ensure that the new pension reform, which was adopted in 2010, will stay sustainable in the long term.

About Slovakia, the EC said that it faces significant challenges with regard to the long-term sustainability of public finances, and pensions would be the main worry, despite a major reform implemented in 2004-06. It said: “Additional future pressures on the pay-as-you-go pillar may come from a strong merit component for the calculation of pensions and the indexation mechanism. Changes to the fully-funded pillar in 2008-09, including the requirement for pension funds to cover incurred losses and the removal of compulsory participation for new labour market entrants, undermined its viability. The National Reform Programme and the Stability Programme envisage several adjustments to the pension system that would address its current shortcomings.”

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