» Articles » Pension issues in the social EU policies: cross-sectoral approach 19.05.2013 (7753)

Pension issues in the EU member states are regulated by the so-called supplementary division of competences and are subject to different means from numerous policies. Several Commissioners are responsible for integration process concerning persons under retirement age, i.e. mostly those on pensions. At the same time, these issues are, generally, within the member states competence. Hence, most of them need both political and socio-economic solution.

By Eugene Eteris, LLD, professor in European Studies, Denmark

Retired people suffer most during the crisis periods. Thus, e.g. in Portugal retirement age was raised from 65 to 66; in return, the pension „sustainable“ fund was created in 2013.

Unemployment phenomena has become a part of member states’ social-economic models: the number of people out of occupation reached 12,2 per cent in the eurozone area (more than 10 per cent in the EU-27) in the 2nd quarter of 2013 and totaled 19 million persons. Being an integral component of the EU-2020 strategy, growth and jobs issues occupy a crucial role in getting out of the crisis and forming European future.

In this article pension issues are viewed from the „EU side“, in close connections with the employment strategies and age issues (2012 was the European Age Year) leaving aside purely national strategies, policies and approaches.  

Cross-sectoral approach

So-called „seniors“ (generally, those after 60-65) represent a social-political issue that goes through several policy lines, both in the EU and in the member states. Among the former there are Commissioners dealing with e.g. social issues (László Andor, Employment, Social Affairs and Inclusion ), jobs and growth in the internal market (Michel Barnier, Internal Market and Services ), industrial policy (Antonio Tajani, Vice-President, Industry and Entrepreneurship, fundamental rights (Viviane Reding, Vice-President, Justice, Fundamental Rights and Citizenship), health (Tonio Borg, Health and Consumer Policy), as well as a number of sectoral policy Commissioners; among them are also two Commission’s vice-presidents.

Among the EU policies, there is a „section“ called „Employment and social rights“; within this section there is a sub-section called „pensions“.

General rules

Thus, pensions are within the EU social security coordination. In each country, personal insurance records are preserved until a person reached the pensionable age. General „European rules“ are such that every EU member state (incl. Iceland, Liechtenstein, Norway and Switzerland) where a person has been insured for at least one year will pay such person an old-age pension, when one reaches national pensionable age.

For example, if a person has worked in three countries, he/she would get three separate old-age pensions.

The pension remuneration is calculated according to a person’s insurance record in each country: the sum one will receive from each of these countries will correspond to the length of social security coverage in the countries.

A kind of summary note will be received by a person, which will provide an overview of the decisions made by each country on a person’s claim.

The application for pension shall be filled in each country one has been working in. Even if one has worked in several countries, application for pension should be filled in the country of permanent residence. Otherwise one should apply in the country where the last working place occurred.

EU’s employment scenario: common strategy for growth and jobs

Most of the issues from the EU side are within the shared and supplementary competences; that means that generally „seniors“ are subject to the member states’ regulatory regimes. In the latter, as well as in the EU, these issues are concentrated on almost the same cross-sectoral agenda.

However, the pension’s issues are mainly connected to the member states and the EU approaches to employment programs and policies, as well as towards rebalancing the European economy.

According to the European Commission, the EU employment scenario looks grim, e.g. in the beginning of 2013, unemployment rates further rose to 10,9% among the EU member states (totaling 26,3 million people) and 12% in 17 states in the euro area (about 19 million people).

Dramatic differentials in economic and employment conditions within the euro-zone area is of particular concern for the EU institutions, as Southern European countries seems to be trapped in a never-ending spiral of recession and unemployment.

This „harsh reality“ has encouraged the EU to react with even more determination. Thus, the present crisis has become a catalyst for profound change in the EU. Latest developments have shown that the EU policy is actually heading towards a more balanced architecture for the European Monetary Union, EMU.

The Commission and the member states are developing a strategy that combines fiscal consolidation efforts with an integrated strategy for economic and employment growth, as well as the social cohesion.

Employment strategy and the EMU

With its blueprint for a deep and genuine EMU, the Commission has kicked off a European debate over the necessary redesign of the EU common strategy for growth and jobs (e.g. in mid-2013 the unemployment rate has reached 12,2%, which equals to about 20 mln people). Recent developments show that there is agreement for strengthening the social dimension of the EMU, alongside closer surveillance of macroeconomic policies.

Severe employment and social problems in one country of the currency union have negative economic spill-overs and politically destabilising effects for the EMU as a whole.
Moreover, socio-economic divergences are a bigger problem for the stability of the currency union than they are for the stability of the Union as a whole. When unilateral currency devaluation is not possible, individual member states have fewer economic adjustment tools available.

The economic governance of a genuine EMU envisages the need to allow collective measures on employment and social problems before they develop, so-called „disproportionally“ at member state and the EU level. A scoreboard of employment and social indicators prepared by Eurostat can help the EU institutions on better approach to mounting employment and social changes.

The social dimension of EMU is also about reinforcing the role of the social partners. Adequate involvement and participation of social partners in policy debates and decision-making is critical.

The road to a genuine EMU will be still long and winding, but it is highly encouraging that the path towards a more social European model.

[…]

Supplement: example of the EU efforts to support retired persons

Old-age benefits: Commission refers Slovakia to Court of Justice for refusing to pay an old-age benefit to pensioners abroad.

The Commission contacted the Slovak authorities after it received complaints from Slovak nationals living abroad. In November 2012, the Commission requested Slovakia to end the discrimination against pensioners living abroad, but the Slovak authorities have not notified the Commission of any measures taken to end the discrimination. On the contrary, the Slovak authorities confirmed in their official reply to the Commission that the Christmas supplement would not be paid to Slovak pensioners living in another Member State and that they would continue to dispute the classification of this benefit under EU law. (8)

The European Commission has referred Slovakia to the EU’s Court of Justice for refusing to pay an old-age benefit, a so called Christmas allowance, to pensioners living in other EU Member States, Iceland, Liechtenstein, Norway or Switzerland in breach of its obligations under EU law on social security coordination.

Under EU law, entitlement to an old-age benefit cannot be conditional on a pensioner living in another EU state where he or she claims the benefit. This rule enables pensioners to move to another member state when they retire whilst retaining their pension.

Slovak legislation provides that all persons who receive a statutory pension, or pensions below 60 % of average wages in Slovakia, are entitled to a Christmas allowance (’vianočný príspevok’). However, this benefit is not provided to pensioners living outside Slovakia. As a consequence, pensioners receiving Slovak statutory pensions who live in another Member State are at a disadvantage compared to pensioners who have not left Slovakia.

As the purpose of the Christmas bonus is to compensate for increased living costs incurred by pensioners, the allowance qualifies as an old-age benefit under EU social security coordination rules as interpreted by the EU’s Court of Justice

By Eugene Eteris, LLD, professor in European Studies, Denmark baltic-course.com

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