Referencing recent events in Hungary – which saw prime minister Viktor Orbán's government transfer the majority of second-pillar assets into the state treasury in an effort to tackle its deficit – chairman Patrick Burke said such an approach was regrettable.
Responding to the European Union's recent annual growth survey, the lobby group said governments should look for long-term solutions to mounting debt, and that growing private pension provision was one of these, as it reduces dependence on state benefits. "Such policies only serve to solve short-term problems, but jeopardise the adequacy and sustainability of future retirement income," Burke said.
The lobbying group conceded that the 60% debt level enforced by the EU did now allow for leeway to account for the cost of funded pension systems – following demands by nine member states, including Sweden. However, the concession only allowed for pension fund cost to be exempt from debt levels for five years. In the event of another recession, governments might consider sacrificing funded pensions once again, the EFRP said.
Chris Verhaegen, secretary general at the EFRP, also warned governments against using inflation as a means of reducing the real value of its debt, saying this was being achieved by financing new debt with nominal bonds. She said: "We urge member states to enhance their commitment to price stability by issuing more index-linked bonds. In turn, that would allow pension providers to better protect citizens' old-age income against erosion due to inflation."
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