20 March 2017

Eurogroup Statement on the structural reform agenda - thematic discussions on growth and jobs: benchmarking pension sustainability

Following agreement in June 2016 on common principles guiding euro area Member States' reforms to strengthen pension sustainability, the Eurogroup has discussed benchmarking as a tool to provide further support and impetus to reforms in this area.

The Eurogroup recalls that in times of high public debt, the importance of pension sustainability from a financial, economic and social point of view renders developments in this field a matter of common concern in the euro area. The Eurogroup considers that significant progress has been achieved in improving pension sustainability in the euro area. However, it also acknowledges that considerable risks remain in many Member States and that further policy action is needed. Against this background, the Eurogroup considers benchmarking to be a useful tool for highlighting the possible need and scope for further reform in this field.

The Eurogroup has agreed to benchmark the fiscal sustainability of euro area Member States' pension systems against the best performers of the euro area according to the indicators presented in the table below. Such benchmarking will rely as a matter of priority on two commonly agreed indicators measuring the gap to a sustainable fiscal position, including the impact of pension spending. These benchmarks are measurable and under the control of policy makers. In order to have a comprehensive and balanced view, they will be complemented by the following flanking indicators: the comparative level and evolution of the legal and effective retirement age, the coverage ratio and the pension benefit ratio.

While acknowledging the competences and the work carried out by other Council formations, in particular EPSCO, the Eurogroup will conduct every three years starting in 2018 this benchmarking exercise within the context of existing processes and surveillance mechanisms, in particular the Ageing Reports and the assessment of the Stability Programmes.

As the key features of pension systems interact with labour market institutions and social safety nets, the approach needs to be comprehensive. Pension sustainability also needs to be examined in its full country-specific policy context, including the existence of automatic adjustment mechanisms. The resilience of pension systems to adverse macroeconomic and demographic prospects and their social adequacy should also be taken into account in the overall benchmarking exercise, in line with the common principles adopted in June 2016.

Press release

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