This Thursday, the 20th, the European Commission asked European Union countries to adapt their pension systems to promote complementary pensions, such as retirement insurance and PPR, little used in Portugal, suggesting automatic enrollment and professional funds.
“The European Commission today adopted a set of measures to help citizens guarantee adequate income in retirement, improving access to more effective and better quality supplementary pensions. The proposed actions aim to complement – and not replace – public pensions, which form the basis of pension systems in all Member States”, announces the community executive.
At stake are “stronger and more efficient supplementary pension systems”, which “can also contribute to Europe’s economic growth and competitiveness, by mobilizing long-term savings for productive investments”, according to the institution.
Brussels justifies that, “in view of demographic changes and the dynamics of the labor market”, adaptations to pension systems are necessary.
The Portuguese system, which is mainly based on the public Social Security pension, faces, like other EU countries, challenges such as the rapid aging of the population, future pensions that tend to be lower, low adherence to complementary plans and irregular contributory careers.
Faced with such issues, Brussels is asking Portugal and other European countries to start using automatic enrollment in supplementary pension plans, with a free exit option, which would involve companies making such plans available and workers contributing small percentages of their salary to such savings.
At the same time, the community executive wants each EU country to have a system that allows each citizen to see all pension rights in one place, which in the country’s case would imply that Social Security has a monitoring system for public reforms, but also professional, private funds and the Retirement Savings Plan (PPR).
This would allow those who worked in other EU countries to see everything centrally, including future projections.
The institution also wants national pension panels, which enable governments to monitor the sustainability of the system, the adequacy of pensions and the rate of adherence to complementary plans.
Today, a reform of occupational pension funds is also proposed, as there are few of them in Portugal and they are small in size.
The proposed changes aim for greater consolidation, more diversified investments and less bureaucracy with the aim of encouraging companies – especially large employers – to create more competitive complementary plans.
At a time when the Pan-European Personal Pension is little used in the EU, the European Commission also wants to make this package simpler and cheaper, to be an alternative to traditional PPRs if it were, for example, more beneficial in tax terms.
Even today, the EU clarifies the prudent investor principle to make it easier for pension funds to invest more in shares, which are historically more profitable.
Today’s proposals would allow younger workers to automatically enter supplementary savings systems and self-employed workers to have access to simpler, cheaper products.
People who worked in several countries would see their rights clarified and integrated and there would be greater equality between men and women in pensions, when the average difference is still around 24.5% in the EU.
It is now up to Parliament and the Council to negotiate and approve such proposals.