Commission calls UK to task over 'grey' plans

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The Independent Online

Britain was bracketed alongside France, Germany and Italy yesterday in its ability to deal with a greying population, casting doubt on assumptions that the UK is better equipped to cope than its neighbours.

A report from the European Commission highlighted Britain's greater reliance on private and fully funded pensions, but outlined the scale of difficulties posed by the retirement of a generation of baby-boomers, allied to increased social spending.

Across the EU the assessment of the risk to sustainable finances was judged low in nine countries, including Austria, Denmark, the Netherlands, Poland and Sweden.

The UK was ranked with other "medium risk" countries - Belgium, France, Germany, Ireland, Italy, Luxembourg, Malta, Slovakia and Spain - where the impact will range from 2-5 per cent of gross domestic product. However, Britain was ahead of six "high risk" groups. The document says that the projected increase in age-related spending in the UK is "somewhat higher than on average in the EU rising 4 percentage points of gross domestic product between 2004 and 2050".

Although the likely rise in spending on pensions is limited, health care is expected to increase above the EU average, by 1.9 percentage points.

The report also warns that private pensions may fail to deliver adequate sums of cash. "Current pension arrangements might come under pressure at some point," the document says, adding: "Risks to the public finances in the future cannot be excluded."

The European social affairs commissioner, Vladimir Spidla, said, across the continent by 2050, two workers would have to support one pensioner. At present that burden is shared by four people. Birth rates are falling, with women in the EU having only 1.5 children on average, and more needs to be done to help mothers return to the labour market and encourage employers to hire older workers.

Joaquin Almunia, European monetary affairs commissioner, argued: "Unless member states do something serious about defusing the pension timebomb, it will go off in the hands of our children and grandchildren." He added: "Doing nothing is not enough, policy action is needed."

The Commission urged the EU's 25 member states to achieve sound budgetary positions and to make faster progress in reducing government debt.