Transcript THE PURCHASING POWER OF PENSIONS IN EUROPE

Impact of the financial
and economic crisis
on elderly women
September 2010
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Facts beyond reality
“We need to ensure that pensions do the job intended
of providing the maximum support to current and future
pensioners, including for vulnerable groups.“ - José
Manuel Barroso
The European Union has declared 2010 to be the European Year for
Combating Poverty and Social Exclusion, and is emphasizing gender
mainstreaming. Gender equality is a key element of the EU’s strategy for
anti-poverty and social inclusion. The UN emphasizes that equality and
non-discrimination are essential elements in a human rights approach to
poverty reduction.
The issue of women‘s equality must be put back on the policy agenda.
The current economic recession cannot be used as an excuse to postpone taking action on the continuing poverty in which many women find
themselves.
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• Ageing populations in all Member States have put
existing retirement systems under massive strain
and the financial and economic crisis has only
increased this pressure.
• European Commission: “As the number of
pensioners in Europe rises, and the relative
number of people of working age declines, further
reforms are needed if adequate pensions are to
remain sustainable". From 2015 onwards, deaths
are projected to outnumber births in the EU so that,
by 2060, one in three Europeans will be aged
over 65, putting a huge burden on the economy
and public finances.
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What Europeans believe it is like
EUROSTAT, 2009.
•
24% consider people are poor when their resources are so limited that they
cannot participate fully in the society they live in. A further 22% of people
surveyed see poverty as not being able to afford the basic goods one needs to
live, while 21% view it as having to depend on charity or public subsidies.
•
Nearly three quarters (73%) feel that poverty in their country is widespread.
•
84% think that poverty has increased in their country in the last three
years.
•
Over half of Europeans (56%) believe that the unemployed are most at risk of
poverty. 41% believe that the elderly are most vulnerable, and 31% see
those with a low level of education, training or skills as most at risk.
•
With an ageing population, long-term care services are a source of
concern: 45% think they are not affordable.
•
Across Europe, 53% feel that their national governments are primarily
responsible for combating poverty.
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How it is like?
• In most EU member states, 22% of older women experience poverty
compared to 17% of men. Among single parents 35% live in poverty,
and majority are women.
• Women earn app. 20% less than men in equivalent jobs. The pay gap
between men and women throughout their working lives inevitably
leaves women with smaller pensions.
•
Within the vulnerable group of elderly people, there are those who are
particularly at risk. Elderly women often receive a reduced pension
allowance because they have cared for family members rather than being
professionally active.
•
The number of people in the EU aged 65 and above is expected to grow by
70% by 2050, and the number of people aged over 80 by 170%, according
to the EU Health Directorate. This will not only require new social security
strategies, but it will also have strong implications for health care
systems.
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Why it is like that?
• Currently, only 36.8% of women between the ages of
55 and 64 are employed, compared to 55% of men, and
European women are four times more likely than men to
have part-time jobs, fixed-term contracts or no contracts
at all. As a result, some 35% of women aged over 65
risk poverty, compared to 16% of older men.
YES: Women predominate among those with atypical contracts,
they tend to earn less than men and tend to take career breaks for
caring responsibilities more often than men. As a consequence, their
pensions tend to be lower and the risk of poverty tends to be higher
among older women, also because they live longer.
* While periods of care are recognised in some PAYG systems, this is less
straightforward in funded pension schemes.
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Older – worse!
• While 55 percent of all persons aged 65 and
over are elderly women, 70 percent of the
elderly poor are women.
• Older women living alone average about 29
percent of all persons 65 and over, but are
nearly one-half (49 percent) of all poor persons
in these nations.
• At older ages (aged 75 and over), where needs
are greatest, 75 percent of the poor are women
and 58 percent are women living alone.
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Black side
• In some countries divorced, widowed and nevermarried women have poverty rates more than double
overall elder poverty rates, despite the high average
labour force participation rates and pension benefits
of their cohorts.
• Women are more likely than men to have poor
housing, to neglect their health and struggle to find
child-care services. Financial precariousness can
cause women to stay with violent men and force
others into prostitution and human trafficking. This
gender imbalance is likely to grow in the current
economic climate.
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Impact of economic crisis?
• High rates of poverty around the world had already attracted the
attention of policy-makers even before the economic crisis hit. Antipoverty strategies become even more important when wages are
being cut, employers are facing bankruptcy, pension security is
threatened, and social safety nets have been eroded just at the time
when people are losing their jobs and need support.
•
Now it is possible to see the gender dimension of the recession. At first it
seemed to mainly affect men in the car and construction industries, but
women are being hit in different ways as they are more economically
vulnerable to start off with.
• Freezing and cuts of pensions - realised or planned: Greece, UK,
Spain, Romania, Latvia, Poland Croatia
• Cuts in social safety net (social assistance)
BUT: Cutting and freezing pensions leads to further
increase of poverty!
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Worse to follow?
• Crisis and lower growth prospects will affect all types of
pension schemes.
• Estimates suggest that the crisis will put further pressure on
public pension spending over the long-term because economic
growth is set to be considerably lower and there is great
uncertainty as to the timing of the full recovery.
• In a number of Member States some social security
contributions were diverted to newly established mandatory
funded pensions. The crisis has underscored this double
payment problem and has caused a few governments to halt or
lower contributions to private pensions to improve public
pension finances.
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Green Paper on Pensions
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European Commission President José Manuel Barroso said that "the
crisis has shown the importance of the European approach to pension
systems. It has demonstrated the interdependence of the various pension
pillars within each Member State and the importance of common EU
approaches on solvency and social adequacy. It has also underlined that
pension funds are an important part of the financial system”.
•
The European Social Charter states that “every elderly person has the
right to social protection”. This means that states must ensure that
pensions are sufficient to allow elderly persons to lead a “decent life”.
Pensions should therefore be index-linked and related to average wage
levels and the overall cost of living.
Older people do not have a strong say in politics and media. Their rights are
often ignored and sometimes totally denied. The fact that a clear majority of the
elderly are women may also have contributed to this lack of political attention.
European political leaders need to review their own policies for the rights of
elderly people.
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Adequate, sustainable and safe pensions?
GREEN PAPER does not question Member States' prerogatives in pensions or the role
of social partners and it does not suggest that there is one 'ideal' one-size-fits-all pension
system design. The principles of solidarity between generations and national solidarity
are key in this regard. in particular, it aims to address the following issues:
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Ensuring adequate incomes in retirement and making sure pension systems are sustainable in
the long term
Achieving the right balance between work and retirement and facilitating a longer active life
Removing obstacles to people who work in different EU countries and to the internal market
for retirement products
Making pensions safer in the wake of the recent economic crisis, both now and in the longer term
Making sure pensions are more transparent so that people can take informed decisions about
their own retirement income
BUT:
•
proposals hit women much more than men and the result will be a much higher
risk of poverty among older women;
•
it is a great pity that the Green Paper does not include a specific section on the
gender dimension, despite the fact that the EU is supposed to mainstream
gender issues in all its work
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Key findings: Lost generation?
The elderly is one of the vulnerable groups that have been deeply affected by the
economic crises. In Europe especially, ageing persons in the so-called transition
countries have been hit hard. The number of elderly people begging in the streets
goes to prove that their human right to an adequate standard of living is not
respected. The term ‘lost generation’ is sadly appropriate.
YES: Hundreds of thousands of elderly persons across Europe are struggling for
their everyday survival. Many suffer a shocking level of poverty. They tend to be
ignored by politicians and are often seen as being non productive and worthless in
modern society. The human rights of the older generation must not be further
undermined when governments introduce their austerity programs.
BUT: In majority of the “old” EU countries, secure incomes from public pensions,
which generally have been allowed to perform their role as automatic stabilisers,
current pensioners have so far been among those least affected by the crisis.
Exceptions apart, benefits from funded schemes still play a marginal role and just a
few Member States with very acute public budget problems or well-anchored
automatic adjustment mechanisms were compelled to reduce public pensions in
payment.
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Key findings: Life-long working?
In the wake of the economic crises several countries have been forced to
reform their pension systems, using the similar pattern. Encouraging
more people to work more and longer so as to obtain similar
entitlements as before: increases in pensionable ages; rewarding later
and penalising earlier retirement; moves from benefits based on
earnings in best years towards entitlement based on working career
average earnings; closing or restricting early exit pathways; labour
market measures to encourage and enable older workers to stay in the
labour market and encouraging greater gender equality in the labour
PENSION AGE: Setting retirement ages or increasing the
pensionable age is the open tendency and the Green Paper does not
make firm recommendations, but it encourages the governments to do
that to increase the number of contributory years required for a full
pension! Women and men – the same pension age without family
benefits?! 65? 67? 70? It sounds like - life-long working!
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Key findings: Private, not public?
• PRIVATE FUNDS: The Commission does not advocate
one particular type of pension system but it recognises
that private and funded pensions are playing an
increasing role in the retirement. Unfortunately, in the
short term, the return rates and solvency of funded
schemes have been affected through falls in interest
rates and asset values: private pension funds lost
over 20% of their value during 2008.
PLUS: Private pensions discriminate against women!
EU legislation permits financial companies to
discriminate against women as they have a slightly
longer life expectancy than men. This is more likely
to hit women who take time out of work for childcare.
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Food for thought 1
The challenge for policy makers is to design systems of retirement benefits that
guarantee minimum standards of living for all elderly women while also preserving
incentives for self financed retirement. In sum, countries that do best in the fight
against elder poverty are those with high minimum “first pillar” traditional (defined
benefit type) social retirement plans for all elderly. But population aging in coming
decades will increase pressure on these governments to reduce these benefits and
to turn their systems more toward defined contribution type pension plans.
Less than 50% of people are still in employment by the age of 60. This
goes against Member State commitments at the Barcelona European
Council to postpone the age at which people stop working by five years.
It is also inconsistent with the objective of reaching the Europe 2020 75%
employment rate target and impacts negatively on growth potential. The
steep rise in old-age dependency ratios could be largely avoided if people
would work longer…
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Food for thought 2
• States must ensure that pensions are sufficient to allow elderly
persons to lead a “decent life”. Pensions should therefore be
index-linked and related to average wage levels and the overall
cost of living.
The lack of compensatory crediting for periods of unemployment,
sickness or caring duties can also lead to gaps, as can lack of
coverage of vulnerable groups, such as short-term contract and
atypical workers, or insufficient minimum pension guarantees or
income provision for older people, but these raise questions about
financing!
The issue of women‘s equality must be put back on the policy
agenda. We cannot use the current economic recession as an
excuse to postpone taking action on the continuing poverty in
which many women find themselves. In these uncertain times,
our commitment to protect those who are most vulnerable
matters more than ever.
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Food for thought 3
• There are unclear boundaries between: social
security schemes and private schemes;
occupational and individual schemes; and voluntary
and mandatory schemes.
• More flexibility on retirement ages on the basis of
personal preferences and capabilities would be logical,
especially when there are not enough resources for
decent pensions.
• Member States should address issues such as
minimum pensions, coverage of atypical workers
and crediting of some involuntary employment
breaks (women!)
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The risk is that several generations will
face poverty as they grow old is a reality
that seemingly still has not been fully
understood by everyone. The risk that
the eldery women pay the highest price
is even more out of the public interest.
Lets make our voice heard!
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let people know that being poor is not their fault
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