A much-debated subject lately has undoubtedly been pension reform, after the government issued a white paper suggesting the way forward.
I believe that one has to be very careful when discussing a subject like this because, unfortunately, there is a tendency to politicise such important issues that will determine the well-being of many citizens.
Pension reform receives more attention in countries throughout Europe than any other topic on the economic agenda, but in no area of the European policy debate has progress been more uneven, mainly due to diverging ideas and a reluctance to adapt to change.
Why do we need a reform of our pension system? What has gone wrong with it? Why does it need to change?
Usually, when life expectancy increases between two generations, even with constant fertility rates, each age group is more numerous than the previous one because life expectancy improvement comes from lower death probabilities at each age. But in the recent past, longer life expectancies have been attributed mainly to large decreases in death probabilities among older people. This has caused an imbalance between the work force and those who have retired, and the problem needs to be addressed.
Almost all European countries have experienced similar problems in this regard, notwithstanding the type of pension system they use, whether it was the Bismarkian social insurance schemes used in France, Germany and Italy or the other system used in Britain, which is very similar to ours.
The process of reform, therefore, is varied everywhere and the demography of a country plays a very important part in this. Different policy models and distinct constituencies create different needs, and one has to keep this in mind when making comparisons.
Several European countries have started to introduce reforms aimed at the sustainability of their retirement income systems. These reforms aim to strengthen the link between pension benefits and contributions. At this point in time many pension schemes such as ours still assume the strict life stages of education, work and retirement leisure. But a modern economy, and the need for lifelong learning, requires a pension scheme that encourages the mixing of these three activities rather than impeding it, for example going back to school after years of work, bringing (retirement) leisure forward or taking up work again after retirement. Our current pension scheme indirectly discourages this flexibility and our aim should be to make it possible and attainable by the largest margin possible.
When reflecting on policy reform experiences, policy makers tend to dwell on the difficulties of reform and the barriers to structural change.
The common wisdom from this line of argument is the best that would-be reformers can hope for is an iterative process of incremental and piecemeal change. We must not fall into this trap. We must aim to restructure our pension system fundamentally even though in making this choice, policy-makers have to be extremely careful not to be hindered by the fear of introducing reforms that will end up being politically costly.
An analysis of recent European pension policy reform has shown that the reluctance to reform has more to do with the dominance of expert orientated policy network than with democratic politics.
We have to be a united front in this mammoth task. We have to sit down and share ideas if we want to have positive results. This is a matter of national interest. Let us have a healthy debate, let us put aside partisan politics and try and concentrate on the well-being of future generations.
David Casa is a Nationalist MEP
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