Getting ready across Europe
With the EU pensions directive now law, IPE interviewed a pensions expert from each of the member states to see how their country was going to be impacted, and what plans have been put in place.
AUSTRIA: According to Dietmar Neyer of the Association of Austrian Pensionskassen, the pension funds and “kassen” have already started evaluating the impact of the EU directive on the Austrian legislation. The social partners and the Ministry of Finance are now in the process of finishing their consultation papers, and the Ministry plans to publish a draft of the implementation of the EU directive in the second quarter of 2004. It is, therefore, expected that the Ministry of Finance will commence the first round of talks at latest in December 2003. “Major areas of discussion will be a level playing field, transparency, regulatory own funds and investment regulations,” believes Neyer.
BELGIUM: At present, consultation on the implementation of the EU directive into national law has not formally commenced. Says Hugo Clemeur, secretary general of the Belgian Pension Fund Association: “The CBFA is supposed to be giving guidelines and opinions on the transposition of the directive, but I don’t believe they are working on it on a formal basis just yet.” Clemeur believes the real challenge set by the directive will be cross-border and pan-European pensions, as present legislation is not ready. The investment rules and general principles will not be difficult to address, though, he says.
DENMARK: As yet in Denmark, no decisions have been made regarding the implementation of the EU pension directive requirements. An authoritative source said: “There is no real rush as yet as we have two years. And, most of Denmark’s pension schemes are covered by the life directive.”
FINLAND: A working group in Finland is starting its consultation in January 2004, and is scheduled to have produced proposals for the implementation of the directive by the end of 2004. The proposals will then proceed to parliament in the spring of 2005, although it is unlikely that amendments will be made much earlier than the September 2005 deadline. Katriina Lehtipuro of the Finnish Ministry of Social Affairs said the working group would also assess the present national framework for occupational pension funds and if necessary modernise the whole framework in addition to implementing the directive. “We do not expect that there will be considerable problems or changes the directive’s requirements. However, the most challenging issue is the implementation of the ‘prudent person principal’, since we have very little experience of it. We will study the ‘best practises’ of other countries to find out solutions suitable for us, and consult other member states. The supervision of the pension funds needs also to be looked at as well as the quality of information given by the pension funds and investment policies,” says Lehtipuro.
FRANCE: Commenting for France, Michel Piermay, head of Fixage Consultants, said that, at present, the directive is not being formally discussed. “It is not a major point for the French market, as we don’t officially have pension funds. The two new products, PERP and PPESVR are not affected. PERPs are a life assurance product. Then we have the PAYG system, which is also unaffected by the directive.”
GERMANY: Klaus Stiefermann, of the occupational pensions association, ABA, believes Germany to be ahead of schedule with regards to the directive’s implementation. “Many of the issues handled in the directive have been under discussion for years in Germany, and were therefore dealt with during the last reforms. Regarding the right of information required by the EU directive, Germany is also ahead of time, and discussions have taken place.” There are some areas which will require work, however. Stiefermann highlights the investment guidelines, and international appeal of the pensionsfonds as two such themes under the microscope.
GREECE: Greece is fairly advanced member state with regards to the transposition of the EU pensions directive into national law, believes George Kendouris of consultants Hewitt Associates in Athens. “Some parts of the directive were applied to the Greek pensions law which was passed in July 2002, so the basic issues have already been clarified. A legal framework for the adopting the requirements of the directive have been set up, but there are still some issues open. The issue of tax treatment of benefits, for example, and contracting out. These are supposed to be agreed by the end of this year, but that is very optimistic. However, when the Greek elections are out of the way, the project will move much faster.”
IRELAND: In Ireland, a blueprint of the areas of Irish legislation that may need to be changed has been put together, but has yet to be published. Says Anne Vaughan, principal in the pensions policy unit of the Department of Social Affairs in Dublin: “There have been no concrete decisions, but implementation of the directive is planned for the first quarter of 2005. Between now and then we will be consulting with the various interests on how to move forward.” How the consultation process will occur has yet to be decided.
ITALY: Raffaele Capuano of the Ministry of Economy and Finance in Rome said that Italy was still at an early stage, but in the coming months “the principles for the transposition in Italy of the European directive will be established”. No precise timeframe has been set, he added. Ambrogio Rinaldi of COVIP, which will collaborate with the drafting of the transposition, said that the regulator is “still at an early stage of the preliminary work on the draft”.
LUXEMBOURG: The two pension fund authorities in Luxembourg have already put together working groups on how to amend the existing laws, but “it is too early to say what has come out of them”, says Fernand Grulms, director of Pecoma International. He believes that one of the major points that will be discussed will be custody. At present Luxembourg pension fund law states that investment funds must have custodian in the same jurisdiction. The EU pensions directive, however, states that this is not necessary.
NETHERLANDS: The Dutch Ministry of Social Affairs has noted the directive, but is not expected to begin work on transposing the requirements, until the country’s new pensions act, which is currently under consultation, has been agreed. Explains Martin van ‘t Zet from the industry wide pensions organisation, VB: “The law states that we cannot include the EU directive requirements within the new national pensions act, but it does not make sense to implement the directive within the current pensions act as it is about to be changed. What the government is now trying to do is wait for the new pensions act to be adopted – which should be 2004 – and then make proposals that will include the requirements of the directive. Clearly if the pensions act is delayed then so too will be the transposition of the EU pensions directive.”
PORTUGAL: As yet in Portugal, there is no formal timetable in place, although Rui Guerra, of Mercer Investment Consulting in Lisbon, believes the requirements of the directive will be answered before 2005. “The Portuguese law already reflects a significant part of the requirements. However, there are still a few issues that need to be discussed – that is, information, taxation, investments. Information to be provided still needs to be incorporated, as well as the possibility of non-Portuguese managers to manage directly Portuguese pensionfunds.”
SPAIN: In Spain, the adoption of the requirements laid out in the European pensions directive, is well underway. “There is a draft by-law that supplements the Spanish pension law, that has been circulated among consultants, union, sponsors, insurers and investment managers for consultation, and the Spanish administration has taken this opportunity to include the recommendations of the European pensions directive,” says Constantino Gomez, of Mercer Human Resource Consulting in Madrid. “We understand that the administration would like to have the by-law passed before the state elections which are expected to be held in Spring 2004.” The consultation paper is now back with the Spanish Ministry of Economy. Gomez says that the proposals in the by-law which reflect the requirements of the directive involve the recommendations of information to members and beneficiaries, and the adoption of an investment policy statement.
SWEDEN: Several weeks ago, the Swedish government commissioned Anders Nordstrom, to prepare a set of proposals on how to implement the EU pensions directive. Nordstrom has a legal background, and has produced several reports for the Swedish government on legislative issues. An official report will be prepared for September next year, and the following step will be to prepare the bill. Johan Lundstrom, of the Swedish Ministry of Finance believes this will be in Spring of 2005. One area that will be most affected, believes Lundstrom, is that of pensions foundations. “They will have to have new legislation as a result of the directive. They have very poor investment rules, so there will be a big change there.”
UK: The UK started a two-month consultation period in October regarding on the implementation of the directive. This will close on 23 December 2003. A spokeswoman for the Department of Work and Pensions could not confirm a definite timetable, saying only that the results of the consultation paper would be considered, and the following step would be legislation. The areas for which the UK government requires advice are set out in the paper on the DWP’s website. On the investment side, however, the government is proposing to amend the law in order to review a statement of investment policy principles at least every three years. In relation to the prudent person rules in the directive, the majority of the recommendations mirror common law and pensions legislation un the UK, but there may be a need to legislate further for non-trust based occupational pension schemes.