EUROPE - Pension underfunding in the new EU member states is adding a significant burden to the pension crisis faced by the original EU-15 countries, new research has found.
A report by Pragma consulting, “The Pensions Issues in the New Member States”, claims the new member states are facing similar problems such as rapidly ageing populations combined with “excessive pension promises” in the underfunded first pillar.
High unemployment and structural discrepancies were flagged up in many of the new member states, with Poland (39.1%) and Slovakia (25%) coming in with the highest unemployment rates. Low fertility rates and low immigration in these countries are also a source for serious concern, the report noted.
According to Pragma, many of the new member states have “regrettably” high insufficient reserves in the second private (or semi-public) pillar and the degree of funding across all pillars differs substantially among these countries, as well as compared with the situation in a majority of the EU-15.
Although Pragma noted six of the ten new member states had started to introduce funded plans in the state pillar by means of individual accounts, this was offset by the fact PAYG state pillar pensions were “too low” and the role of the social partners in pension provision was criticised for being ”minimal, if at all existent.”
Speaking at a conference in Belgium, Koen de Ryck, managing director of Pragma Consulting said the firm had formulated 52 issues for further consideration as well as 26 country-specific issues for the new member states including: encouragement of DB plans; creation of demographic reserve funds for the first pillar; and a stable three-pillar system - state, occupational and individual savings.
“We hope they are food for thought for the European Commission as well as for the new member states,” he said.
Jonathan Stapleton asks whether newly-accredited professional trustees should be a statutory fixture on pension scheme boards.
Savers are being warned by the Insolvency Service to guard their pension pots from investment scammers and negligent trustees as it winds up 24 companies.
Respondents say they should only be required in certain situations as the system is not broken.