Delivered in Plenary 12th April 2000
As medical advances contribute to a steady ageing of the population, the burden of pension provision throughout the Union becomes ever more costly. In the UK, as in the US, Chile, Singapore and, to a lesser extent, the Netherlands the burden on the state and succeeding generations has been significantly eased through the increased provision of supplementary second and third pillar private and occupational pension schemes, involving funds which grow to provide benefits to provide pension benefits following the retirement of the individuals. Both pillars have the advantage of being resistant to demographic change, and third-pillar portable schemes, in particular, which are not restricted to a single companies, enhance labour mobility and choice for the investors and are much more affordable to small and medium enterprises.
I welcome the fact that there is widespread recognition within this House to extend these supplementary schemes throughout Europe, even if there are disagreements over their precise nature and the way that funds are to be invested. The problem needs to be addressed urgently, in my opinion, with demographic pressures in recent years already generating deficits in pay-as-you-go schemes in France, Germany, Italy and Spain. It is even predicted that if the current trend continues some countries will be
facing costs of up to 20% of their GDP in the next ten years for their pension liabilities.
There are, of course, certain risks in equity investments, but there are even greate risks to Europe with stagnant economies. Growing pension funds will dynamise economies by providing large additional capital funds for investment not just in the EU, but also in developing markets, with greater prospects for future growth and returns on investment for our pensioners.
In the case of defined contribution schemes, which give the investor a direct stake in the overall health of the national economy, there will also be a sense of participation in the country of that individual. The state scheme will, of course, remain the primary mechanism for basic provision in old age. But personal responsibility and choice will become the watchwords of success if the demographic challenges of the coming century are to be met successfully. That is why we should not be too prescriptive regarding the issues of biometric risk or investment strategies. We need a light touch regulatory framework, with bilateral tax agreements, which will ensure the portability for those EU nationals working abroad throughout the Union, achieve a genuine Single Market in financial
services and provide a maximum choice to the European investor.