ABSTRACT

This chapter presents steps within the Open Method of Coordination for pensions. Coordination, Member States are considering efforts to secure both the long-term sustainability and adequacy of pensions. The tools for policy coordination in the areas of economic and employment policy were already in place at the time of the Lisbon European Council. The chapter provides a short overview of the current situation of adequacy of pension. It also presents elements on the long-term adequacy of pensions, based on the common indicator of theoretical replacement rates. Two indicators of the effect of pension on the adequacy of pension benefits have been agreed: empirical measures of income-related median pensions to median income and theoretical replacement rate. Pension systems not only aim at ensuring that older people do not have to live in poverty, but more generally at providing arrangements allowing people to maintain, to a reasonable degree, the living standard they achieved during their working live.