The Economic and Social Impact of Coordination

Abstract

In this article the economic and social impacts of the coordination of pensions and pension policy in the EU are analysed. Three different aspects are discussed: the coordination of the individual social security rights of migrant workers; the coordination of national social protection systems; and the coordination of economic and employment policies as far as they affect social security. With respect to the coordination of the individual social security rights of migrant workers, it is argued that this is a prerequisite for the free movement of workers in the EU. The article discusses the impacts of this coordination, such as impacts on pension payments arising from EC Regulation 883/2004 (formerly EC Regulation 1408/71), and the provision of international counselling events. It is noted that the Regulation covers not only old age pensions but also pensions in cases of reduced earning capacity and benefits for rehabilitation. The second area of coordination is implemented through the Open Method of Coordination (OMC). It is argued that, on the one hand, the OMC provides support to national governments to deal with the challenges of social security systems. On the other hand, the OMC also directly influences national social security policies, even though they are actually the responsibility of national authorities. Implications for national pension policy can also be found in the third area of coordination. Both Broad Economic Policy Guidelines and Employment Guidelines are used, which set targets which are relevant for pension policy, such as placing limits on public expenditure and the prolongation of working life. Finally it is argued that in the growing field of second- and third- pillar pension systems there is a need for further coordination.