Transcript 1. Social security 2. Madatory funded systems 3. Voluntary

OVERVIEW OF
THE PRIVATELY MANAGED PENSION FUNDS
SECOND AND THIRD PILLAR
IN THE EU MEMBER STATES
Prof. dr. Yves Stevens
institute for social law
President Belgian occupational pension board
Overview
1. Is there no three pillar model?
2. Privately managed pension funds in the EU
3. Conclusions
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I.
IS THERE NO THREE PILLAR MODEL ?
“Three pillars”
A model that does not exist
Different approaches
Anglo saxon and worldbank
Continental “old” Europe
A common European vision ?
Main advantage
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The three pillar pension system
The world bank vision
3. Voluntary supplemental
benefits
2. Madatory funded
systems
1. Social security
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The three pillar pension system
The continental “old” European vision
3. Voluntary supplementary benefits
2. Mandatory industry sector pensions
Company sponsored benefits
1. Social security benefits
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Example Bulgaria
1st Pillar
State social security
Flows of finance are controlled by public
institutions.
2nd Pillar
Obligatory
Individual accounts
Funded
3rd Pillar
WORLDBANK
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Example Belgium
1st Pillar
State social security
Flows of finance are controlled by public institutions.
2nd Pillar
Occupational and work-related character
Mainly voluntary character (for employer, not for
employee)
Flows of finance controlled by social partners or
employers, outsourced to pension funds and/or
financial institutions.
3rd Pillar
Flows of finance controlled by private institutions
Private individual character - voluntary individual
choice to take part.
“OLD” CONTINENTAL EUROPE
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The three pillar pension system
What some critics say
3. Voluntary supplemental
benefits
2. Madatory funded
systems
1. Social security
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The three pillar pension system
What some critics say
1. The social security benefits
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How difficult to define ? Europe’s quilt
affiliation
level
actors
booking
voluntary
obligatory
national industry-wide company
funds
insurers
internal
external
mixed
individual
banks
mixed
coverage overall
categories
individual
fiscal
EEE ETT ETE EET TET TEE ETE TTE TTT
prudent man  strict state supervision
control
participation organising
risk/cost
finance
supervising managing
none
indvidual  employer  society
repartition open – closed capitalisation
mixed
government organising regulating
managing
controling
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What exists …
An integrated pillar coordinated view on
every pension system
Everything is linked to everything
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II.
PRIVATELY MANAGED
PENSION FUNDS
Privately managed pension funds
Facts
strong increases in the last 10 years in
Europe
increasing number of individual accounts
increasing number of DC plans with
further deterioration of DB plans
Shift towards the “anglo-saxon model” ?
Directive 2003/41
Proposal of directive on portability
Does the World bank model prevail in
the new member states ?
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Privately managed pension funds
Some examples: what happens in …
France
Germany
Italy
Ireland
Sweden
UK
…
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III.
CONCLUSIONS
Conclusions
The proportion between state and additional pensions
determines the degree of solidarity of the system.
The bigger the portion of the state pension, the higher the
income redistribution.
The bigger the additional component, the more the
distribution follows the hierarchy of salaries.
The GDP percentage for pensions (state + additional) is almost
the same everywhere in the EU, BUT the smaller the role of the
state pension, the bigger the income inequality is.
On macro-economical level, all pillars constitute a whole. Save
in the 1th pillar and leave the additional pensions free, is no
solution. All pillars should be regarded together (including tax
benefits to the third pillar).
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Conclusions
Budget and political constraints limit the
possibilities for the development of the first pillar.
The role of other pillars becomes more important.
Pension policy is part of a global social policy
including health care for the elderly, dependency,
poverty exclusion measures, ...
Every Euro spent in whatever pillar remains a cost
that needs to be gained through the economy.
Economic prosperity and growth is a prerequisite
for a sound social system.
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