Occupational Pension as Second Pillar Provision in the EU Policy Context

Abstract

The ageing population in the European Union (EU) and the effects of the financial and economic crisis has strained the sustainability of public pension schemes in Member States (MS). To ensure adequate incomes for people after retirement, many MS are putting increasing emphasis on supplementary forms of retirement income. These include occupational pension schemes that provide retirement income based on employment earnings during working life. Whilst MS are responsible for the design of their pension systems, occupational pensions affect, or are affected by, various EU policies and concerns. Free movement of workers means that workers should preserve rights in occupational pensions when they move to another MS. EU-wide companies need “cost-efficient” ways to provide pensions to workers in different MS. The European Commission has proposed, or will, improvements in both areas. Furthermore, workers also need cost-effective protection against risks (including employer insolvency) and reliable pension information to make good retirement decisions. Increasing reliance on occupational pensions may put women at risk of poverty in old age. Though MS will continue to support a very wide variety of approaches to occupational pensions, the EU can contribute to ensuring that citizens enjoy an adequate and sustainable income in old age. This paper aims to give an insight into how occupational pension stands as “second pillar” provision in the EU policy context. Key issues in pension provisions in the European Union (pensions and employer insolvency, risk management, and gender) have also been discussed. Secondary data have been used in the paper and they have been analyzed using descriptive research method, with appropriate examples of occupational pension provisions in the European Union.The paper concludes that occupational pensions: a) are an efficient way of saving for supplementary pensions, and b) can offer wide coverage and economies of scale in governance, and management.