Can Europe soften the human and financial costs of retirement? This was the main question discussed at the Friends of Europe European Policy Summit held on November 23, 2006, in Brussels. Co-organised by Swiss Life (Belgium), Fortis and EFPIA, the event was an opportunity for politicians, NGOs, journalists, major corporations, trade associations, academics and other interested parties to meet and discuss this important issue. Bruno Pfister, CEO International Swiss Life, was a keynote speaker at this high-level event.
Europe is set to become the oldest continent
In recent years, many discussions have taken place on the need to reform pension and welfare policy in order to cope with the demands of an ageing European population. Due to a continuous rise in mean life expectancy, Europe will soon become the oldest continent in the world. By 2050, the number of young people in Europe will have fallen by 38 million – equivalent to the entire population of Poland.

We face a shrinking workforce and longer lives
Listening to the panelists, it quickly became clear that we face the challenges not only of a shrinking EU workforce, but also of today’s lifestyles. As medical care improves and medical knowledge increases, people are more active for longer when retired. According to Bruno Pfister, in the medium- to long-term, rising life expectancy in combination with a low legally-defined retirement age will make it increasingly difficult to finance pensions for the growing number of retirees. But how should we develop our financial policies for retirement, given that this may span 20 years or more of someone’s life?

There are various ideas on how to deal with the challenge

Several suggestions were discussed at the Summit as recommendations on how to reduce the human and financial costs of retirement created by the shrinking EU workforce:

- Establish financial incentives so that working longer pays off, while also creating disincentives to early retirement to minimize the gap between the actual and the legal retirement age. In addition, ensure there are sufficient jobs that do not discriminate against older people. If this is insufficient, the legal retirement age will need to be raised.
- Streamline professional and academic education based on a life-cycle approach, and make working life more compatible with family life to encourage women to have children.
- Both households and governments need to increase their saving rates, and national economies should allocate capital more effectively to boost returns. Public awareness campaigns are needed to inform and educate people about managing capital and increasing the return on their savings.
- Set the parameters for investments to ensure that asset capital allocation is possible.
- Stop the emigration of young talent while encouraging the entry of skilled workers from outside Europe.
- Reform the healthcare system as the current setup was created after World War II under different circumstances.

Encourage employee savings and pensions
A further important point made at the Summit was the fact that corporate responsibility for encouraging employee savings and pensions contributions needs to be promoted at EU and national levels. Best practice models, such as automatic enrolment of employees in a voluntary savings plan, should be used to increase participation in savings schemes.

We need fair solutions for every generation

It is clear that any solutions need to be acceptable to all generations. The triple load situation, where people have to pay for their own living expenses, as well as for those of their children and their parents, must be avoided at all costs.

There is no single, simple answer. Perhaps the ultimate solution will be a policy mix which includes working more, saving more - and saving more intelligently - and making individuals take more responsibility for their own retirement funding.