European citizens are most fortunate with the prospect that they will continue to live longer over the coming decades. Life expectancy is expected to increase by more than six years for men and over five years for women until 2050. But the ageing population also presents Europe with the major challenge of providing adequate retirement income to its citizens.

At the moment, there are four people of working age to support each retiree. But, in the coming decades, this will decrease to only two persons of working age for every pensioner. Many governments have responded to this trend by reforming their pay-as-you-go pension schemes. As a result, public pension benefits are projected to fall by 25 percent in the EU member states. This means an increase in private retirement savings is essential to prevent the risk of poverty among elderly people.

EFRP promotes the development of second-pillar occupational pensions in Europe. It feels workplace pensions are well-equipped to supplement declining public pension replacement rates, since they:

• achieve high coverage among people who would not themselves save enough for retirement
• can be provided at very low cost by exploiting economies of scale in investment and pension administration
• ensure sound investment decisions by professionals who act in the interests of employers and plan members
• allow for the sharing of demographic and financial risks between generations

See also:

EFRP Paper – Funding and Solvency Principles for IORPs – May 2008