The European Union must draw more people into work, particularly women, and introduce more flexible employment arrangements to avert a "pensions disaster" in the coming decades, a new report has warend.
The number of working-age people for each person over 65 will halve from four today to just two in 2050, the European Commission report predicted, as baby-boomers reach retirement in the years ahead.
Low birth rates and longer life expectancy risk creating a demographic time-bomb, it warned in the first-ever comprehensive look by Brussels at Europe's pensions strategy.
"Our job is to find ways of preventing these demographic developments translating into a pensions disaster, either in the form of poverty among older people, or in the form of unbearably high contributions and tax rates," it said.
"So we are facing a serious challenge, but not one that we cannot cope with."
To address the challenge, EU member states should raise the numbers of people in employment, which compare unfavourably with the United States and Japan, the report said.
More women should be drawn into the labour market and their wage gap with men should be eliminated, but older women should also be given pension entitlements for child-rearing periods, it said.
"We should also encourage older workers to stay longer on the labour market," it added.
"For this, they must be given the right incentives in pension systems which, at present, do not tend to reward those who postpone their retirement or who do not take advantage of early retirement options."
But raising the statutory retirement age may not be necessary, the report said.
"We need to get most people to stay on the labour market until the official retirement age. Very few people do that."
Getting public finances in order now will also be crucial, the Commission said with a nod to economic rules governing the 12-nation euro zone.
Reducing national debt levels is important "so that more resources will be available in the future".
Private pensions should be encouraged, with occupational schemes introduced to cover entire sectors of industry rather than company by company, the report said.
The findings will be taken up by a March summit of EU leaders in Brussels as part of a drive agreed last year to cooperate on finding new ways of footing Europe's bulging pensions bill.
"Without exaggeration, this report is a milestone in EU policy coordination," said Employment and Social Affairs Commissioner Anna Diamantopoulou.
It would help the EU advance "the reforms necessary to secure adequate and sustainable pensions over the long term, and ensure that modern pension systems can match the flexibility which we expect of labour markets", she said.
AFP