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Retirement

U.S., Europe need solutions to fill retirement savings gaps – conference speakers

Former Assistant Secretary of Labor Phyllis Borzi said many self-employed Americans ‘fall through cracks in the sytem’ when it comes to saving for retirement.

The U.S. and Europe have problematic gaps in retirement saving that need filling, potentially through private retirement plan provisions, warned speakers at an industry conference.

Speaking at the inaugural Cross Border Benefits Alliance Europe conference in Brussels on Wednesday, Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, referenced studies estimating that European citizens need "to save an extra €2 trillion ($2.4 trillion) a year to close the pension savings gap." He said that equates to around 13% of European gross domestic product. "This is a huge issue … it is a serious sustainability issue for all society in Europe," he said. "And I firmly believe that private pension provision … needs to play a role in closing this gap."

Mr. Bernardino was one of two keynote speakers at the conference, which addressed the issue of cross-border and pan-European retirement arrangements. He said retirement plan conversations should not revolve around a Europe vs. national debate. "We should be all talking about how can we collectively in Europe have better frameworks," addressing savings gaps, sustainability and adequacy of retirement savings. "That is not a debate between Europe against national members states … that is a debate of society," he said.

Regarding the development of cross-border arrangements, Mr. Bernardino said the current fragmentation of plans in the EU is not optimal for sponsoring employers, nor for employees. He added that he is "pretty sure that a pan-European framework for occupational (defined contribution) will be part of the future," encouraging delegates to bring this discussion at the political level — moves that will have his support, he said.

The second keynote speaker, Phyllis Borzi, former assistant secretary of labor for the U.S. Department of Labor's Employee Benefits Security Administration, said, "We too have a pensions gap."

She said while the voluntary part of the system relies on employers offering a retirement arrangement, in many cases 401(k) plans, participation is also voluntary on the part of the employee.

Ms. Borzi said there is also a set of people in the U.S. who "fall through the cracks in the system" — largely the self-employed. On top of that, the so-called "gig economy" of contingency workers is large and getting larger.

Ms. Borzi said there are not adequate savings opportunities for those who fall through the cracks. She said a second issue, which has been around for a long time, is the question of portability of retirement arrangements.