For the OECD and its secretary-general Mathias Cormann, comprehensive, short-term reform is essential. It is a question of simple logic, he insisted, pointing out that if more pensioners enter the system, it will have fewer and fewer contributors. “The pension system is not sustainable in its current state, despite the size of the reserves accumulated over the last two decades.”
This comprehensive reform he is calling for would ideally combine three elements.
The three-point programme
First, an increase in pension contributions of 2% for employers, employees and the state contribution by 2030. This increase is set to rise to 5% by 2080. Second, a reduction in benefits by ending the indexation of pensions to salaries and capping the replacement rate, which is currently 75% for a full career. And third, raising the retirement age, both the effective age as well as the legal age. The latter would increase by a year and a half per decade, and the early retirement age would also be raised. The OECD also advocates the exclusion of periods of study from the calculation of career length and the end of indexation of pensions to salaries.
Solutions that are bound to provoke controversy, both amongst employees and employers who have made the increase in contributions their red line. Just like the recommendations for reform contained in the November 2022 edition of the OECD study on Luxembourg. Two and a half years ago, the OECD made the same observation--that the system was unsustainable--and proposed solutions such as linking the increase in the statutory retirement age to gains in life expectancy and gradually eliminating incentives for early retirement, whilst proposing more flexible work organisation arrangements for older workers. Will they get more traction this time?
It will not be possible to transpose all the ideas put forward.
“An expert opinion,” stressed prime minister (CSV), who said he was in phase with the OECD’s principles, which were “close to our government’s values.” “The OECD says that if we have an economy that is strong, fair and sustainable, it will generate the growth needed to finance social policy, guarantee individual freedom and people’s well-being. We find this in the organisation’s founding charter and in the government agreement. This is our common thread.”
“But it will not be possible to transpose all the ideas put forward,” he added, pointing out that in a democracy, in order to reform, it is important to have a majority in parliament, the support of the social partners and public opinion.
Referring to the timetable, the prime minister indicated that the social security minister (CSV) was in the process of drafting a report following the two phases of consultations that have just been completed. This report will be presented to the social partners and to parliament “in the near future.” Only then will decisions be taken, he insisted. Decisions will then be announced during the next State of the Nation address, which is due to take place at the end of May, according to our latest information.
This article was originally published in .