Indicators of social security

The Social Security indicators must be improved and made more multi-dimensional. That will be the topic of Rudi Van Dam’s keynote speech at the ETK Conference “Pension Adequacy in Europe - Today and Tomorrow” in Helsinki on 17 September 2019.

The indicators are a politically delicate subject, Van Dam (Chair of the Indicators Subgroup ISG) points out, but “it is very important that we find consensus among the Member States on how we can measure the economic well-being of EU citizens, or the lack of it, in a comparable way.”

To develop the indicators, we need more information. “Among other things, collected data on the wealth of pensioners would be useful,” Van Dam explains.

The governments of the EU Member States also need to provide more information. “For example, we lack EU-level data on the replacement rate on an individual level of persons retiring, that is, predictable data on what kind of pension level a certain income level generates.”

Inequality within the EU also needs to be addressed. “Consider, for example, the share of pensioners who live below the poverty line. In Estonia, 40% of the pensioners live below the poverty line. In Denmark, the Netherlands and France, the share is 10% or less.”

That said, poverty among the elderly has been reduced clearly in the last decade due to, for example, the economic recession. “When poverty is defined in relation to the income level of the overall population, the share of people getting a steady pension and living at risk of poverty is reduced which, in fact, implies that pensions act as an automatic stabilizer of the economy. In addition, we have monitored the development of the purchasing power of pensioners. We have observed that, in absolute terms, the status of the elderly has improved,” Van Dam sums up.

Nearly €195 billion

Net Investment assets of the earnings-related pension system amounted to nearly €195 billion at year-end 2018.

This was the first modest year in terms of investment returns for pension investors since the euro crisis. The investment assets were reduced by nearly €5 billion in 2018.

At year-end 2018, 42.9% of the investment assets were invested in equities and equity-like instruments, 37.1% in fixed market instruments, 9.7% in real estate and 10.3% in alternative funds.

Roughly one quarter (24.5%) of the investment assets were invested in domestic instruments and one fifth (19.9%) in the rest of the euro area. The majority of the investment assets (55.6%) were invested in other parts of the world.

The projected return assumption of the long-term projections of the Finnish Centre for Pensions is 2.5% (up to 2028; 3.5% after that). The average long-term (22 years) annual nominal return has been 5.6% and the real return 4%.

Workforce mobility a hot potato

Regulating posted workers was one of the themes in the French president Emmanuel Macron’s presidential campaign in 2017. Macron criticised the former EU directive for allowing social dumping.

Issues relating to the code of labour law are regulated in the directive for posted workers. France managed to influence the reform of the directive and get strict sanctions. “Since 2017, France has put in place a new provision under which, in case of an inspection, the posting company can be fined if it does not provide the appropriate certificates for its posted workers,” says Arnaud Emériau, President of the European Social Insurance Platform (ESIP) and Head of the EU Office of French social security institutions.

“This is a step in the right direction. The new directive makes it more difficult for Member States to dump social security and wages on other Member States,” Emériau concludes.

The new directive will take effect in 2020.

Rapidly growing number of posted workers

Three million A1 certificates were issued in 2017 by EU Member States. The construction and transport industries have the highest numbers of posted workers.

A total of 2.8 million A1 certificates for posted workers were granted in the EU in 2017. The volume has more than doubled since 2012. The countries granting the most A1 certificates were Poland (574,000), Germany (400,000), Spain and Slovenia (191,000 each), as well as Italy (153,000). The least number of certificates were granted by Finland, Ireland, Greece, Cyprus and Malta (less than 10,000 each).

The number of A1 certificates granted for work in more than one EU country has also risen considerably, from 170,000 in 2010 to more than a million in 2017.

Since a person can be granted more than one A1 certificates during a year, the number of posted workers is about half of the number of granted A1 certificates.

In 2017, Finland received more than 22,000 posted workers, mainly from Germany, Poland and Estonia.

Lena Koski
Lena Koski



Finnish Centre for Pensions

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