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Attention moves to portability

Eight years have passed since the European Commission introduced its first proposals on a Pension Portability Directive, and yet, so far, there has been no sign of this coming to fruition. Back in 2005, it introduced a proposal for a directive aiming to improve the portability of supplementary pension rights. The idea seemed a good one, as it became clear at the time that labour mobility was increasing in Europe, and where there is labour mobility there should also be pension mobility.

Originally, the proposal gave employees the ability to transfer their accrued pension rights as they moved within the EU. But then taxation raised its ugly head. From one country to another, pension contributions are often exempt from taxation, while pension benefits are often taxed. It quickly became clear harmonising tax rules across all EU member states would not be easy.

After long negotiations, the Commission’s project failed to achieve unanimity from all the member states represented in the Council. This ultimately led it to amend the proposal in 2007, excluding provisions on transferability to focus on vesting periods and dormant rights. But yet again there was a hitch, as vesting periods ranged between one and three years in many countries, while others lacked vesting periods altogether.

However, there has been a renewed attempt in the White Paper on Pensions to bring forward a Portability Directive. After the years of work it has put into it, this comes as no surprise. But if the EC really wants to see member states in the Council back its proposals, it will need to compromise. Sources in Brussels have suggested the main opponents, Germany and the Netherlands, might be willing to soften their tone if the EC changes its mind on the IORP II Directive. “Some countries are currently negotiating the implementation of the Pension Portability Directive, for which the voting is imminent,” the sources said. “They would be ready to make concessions on some controversial elements of the directive, such as vesting periods and dormant rights, if Brussels abandoned pillar one of the revised IORP Directive.”

It seems likely some concessions will be made to Germany and the Netherlands, two of the main protagonists leading negotiations on the revised IORP. The Commission will also want to avoid the same problems it encountered in 2007, when the Council rejected the Portability Directive. Late last month, Michel Barnier, the commissioner for internal market and services, said the EC would drop the introduction of pillar one of the revised IORP Directive, at least for now. If this is in fact what Germany and the Netherlands wanted, then the EC might have a chance to see the Portability Directive pass the Council hurdle.

Another source adds that if the Commission manages to reach an agreement with these two countries, Brussels could expect to move ahead “very soon”, as early as September.

However, the next Commission, which will take over in 2014, may very well elect to put the controversial capital-requirement proposals back on the table. And if that happens, nobody can guarantee that the Netherlands and Germany would be willing to reach an agreement on the Portability Directive just yet.

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