Pension crisis. One in five Europeans could live in poverty in old age without urgent changes
Poverty in old age will become the norm for a large part of the population of Europe, if current retirement policies will not be deeply reformed, the EU authority responsible for occupational pensions has warned.
One in five Europeans is already exposed to the risk of living in poverty in old shutterstock photo
“One in five Europeans is already exposed to the risk of living in poverty in old age.”said Petra Hielkema, head of the European Insurance and Occupational Pensions (EIOPA), based in Frankfurt.
“[Este] A ridiculously high percentage, honestly speaking. And if you look at women, they have a 30% higher risk of reaching this situation ”she added in an interview for Politico.
And the situation worsens: the population of Europe ages rapidly, and over 40 years there will be only 1.5 workers for each pensioner. This is half the current report.
“Some countries have already arrived here. And that's not sustainable”Hielkema said. “Europe has a problem with pensions, and countries that do not have additional systems of strong pensions are truly at risk.”
For decades, the standard European model was to rely on a public pension system to ensure the living of citizens at old age. But as people live longer and the birth rates decrease, the cost of financing these systems increases vertiginously.
To this is added other costs of an aging population, such as the health and care of the elderly, and the invoice for taxpayers becomes huge.
A solution is to create complementary private or occupational pension systems, to provide citizens with a personal savings fund that they can use for retirement.
Scandinavian countries are best prepared for the coming crisis, because they have multiple sources for pensioners: a pension system through current contributions, occupational pension funds – which means that when you work, save for your pension – and additional investments in pension products.
But many countries, especially from Eastern and South Europe, are mainly based on state pensions and have lower amounts of retirement compared to wages.
In many cases, citizens are not fully aware of their situation, because public authorities and employers do not give them a complete image of their pension rights. Brussels can only make recommendations, because competence remains at national level.
However, Hielkema, a Dutch man who runs the 2021 occupational pension authority, is convinced that there is “a suitable moment” for a major change, which will give Eiopa a bigger role.
“First of all, we see that the problem becomes bigger, and so do the individual governments. And secondly, to be honest, why are the pensions on the agenda? Because we need more investments, and one of the ways to generate more investments is to move the savings from the bank accounts to investment products.”she explained.
