Europeans seek investment alternatives to public pensions
Some of Europe's most left-wing governments are changing their pension systems in ways more closely resembling the Social Security proposal of George W. Bush than that of Vice President Al Gore, says the New York Times. The German government has announced sweeping plans to reduce retirement benefits, while allowing workers to put some of their retirement tax payments into private pension plans.
Shifting demographics chiefly falling birth rates and increased longevity are squeezing government-run pension systems.
Beginning Jan. 1, Swedish employees will be able to choose asset managers for personal investment accounts funded by 2.5 percentage points of their 18.5 percent payroll taxes.
Italy scaled back pension benefits in the early 1990s and introduced private pension funds; it recently announced tax credits to encourage investment.
To accelerate change, the European Commission recently proposed a single European market in pension funds. Moreover, it wants to unify national tax laws and make it easier for retail investors to move their money across borders.
Europeans are much more dependent on social security for retirement income than Americans:
The amount of mutual fund assets under management in Europe has more than doubled to the equivalent of $3.5 trillion in 2000, from $1.7 trillion five years ago.
That is still less than half the $7.2 trillion in the United States
Overall voluntary pension assets average $23,780 per person in the U.S. and 71 percent of gross domestic product.
By contrast, German retirement savings average $3,800 per person just 14 percent of GDP, and the French, $1,600 (7 percent of GDP).
The exceptions are Britain ($17,200 per person; 77 percent of GDP) and the Netherlands a whopping $32,200 per person, for 127 percent of GDP.
Source: John Tagliabue, Europe Rethinks Its Pensions, New York Times, December 26, 2000.
For NYT text http://www.nytimes.com/2000/12/26/business/26PENS.html
For more on Social Security Reforms In Other Countries
Publish date: 09 January 2001
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.