Objectives and recommendations within the framework of EU economic and social policy.

The authors, Jan Helmdag (SOFI) and Niko Väänänen (ETK) of the "Financial Sustainability Above All Else? Drivers and Types of Pension Reform Recommendations in EU Socio-economic Governance" study analysed 438 pension reform recommendations made between 2011 and 2023. The study analyses how these recommendations are consistent with the three main objectives of the Open Method of Coordination (OMC) – financial sustainability, adequacy and modernisation. The study results show that the majority of recommendations focus on financial sustainability, while social aspects are often neglected.

The Open Method of Coordination (OMC)

The OMC is an important political control instrument of the European Union (EU) which is based on "soft law mechanisms". This includes common guidelines, indicators and benchmarks as well as the exchange of best practices between Member States.

The OMC enables the EU to lay down objectives together with the Member States in areas without legally binding jurisdiction, such as pension policy, and to promote the coordination of national policies. These objectives are specified in greater detail as part of the European Semester, in which the European Commission issues Country-Specific Recommendations (CSRs) to support the Member States with the implementation of these objectives.

In the context of pension policy, the objectives are defined as follows:

Financial sustainability: Ensuring long-term financial feasibility, for example by raising the retirement age or restricting early retirement.

Adequacy of the benefits: Avoiding old-age poverty and guaranteeing an adequate standard of living in old age.

Modernisation and gender equality: Pension systems should respond more flexibly to diverse employment biographies and reduce gender-specific inequalities.

Country-specific recommendations of the EU

According to the study, almost half of the EU Member States receive at least one recommendation per year. Other countries, such as Estonia, have not yet received any. The authors emphasise that this does not automatically indicate perfect pension systems. Despite the lack of recommendations, Estonia has one of the highest poverty risks for older people in the EU. This suggests that social grievances may not be adequately captured by the underlying indicators.

Content focus

70 per cent of the recommendations focus on financial sustainability, for example by raising the retirement age and closing early retirement options. Topics such as gender equality and old-age poverty are rarely addressed. The frequency and type of recommendations depend heavily on indicators for measuring financial sustainability. The employment rate of older employees especially plays a key role here.

Conclusion

The authors argue that the one-sided focus on financial sustainability is problematic, as important social dimensions such as the adequacy of pensions and the further development of pension systems are neglected. Although ensuring financial sustainability is a core justified concern, the authors argue that this must not be done at the expense of social objectives. They suggest promoting targeted measures to take these aspects more into account. These include:

The fight against old-age poverty: Recommendations for the introduction or improvement of basic pensions could help countries at high risk of poverty, such as Estonia or Romania, to achieve an adequate pension level.

The promotion of gender equality: Taking greater account of care periods or measures to close the pension gap between women and men could contribute to fairer pensions for women and men.

The modernisation of pension systems: More flexible pension regulations and the digitalisation of administration could integrate more people into the system and facilitate their access to benefits.

A stronger focus on these dimensions could not only increase the acceptance of pension reforms, but also ensure the long-term stability and social equity of the systems.