A group of pension experts in Switzerland is looking at a particular problem that has come to light that could, in practice, make it harder for individuals leaving the country to take their pension funds with them.
Meanwhile, the EU has been busy exporting its budding pensions model to the rest of the world, with both China and the Ukraine looking to Europe for advice.
Following a series of meetings in Brussels with EU officials and pension groups, Innovation Zweite Säule (IZS), a Swiss-based think-tank, has sounded warnings over a lurking problem that could see workers who want to leave the country unable to take their pension funds with them.
According to Werner Nussbaum, who was the top government official in charge of Swiss pension reform in the 1980s, the problem stems from an earlier decision to allow second pillar mandatory pension systems in the country to be included in the first pillar.
“This was very, very against our design of the three pillar concept because these mandatory occupational pension schemes were always considered as part of the second
and not the first pillar,” Nussbaum explained.
This confusion between the two pension pillars could lead to some regulation that should apply to just the first pillar also impacting on the second, added Nussbaum.
Nussbaum pointed out that Switzerland has chosen to implement EU Regulation 1408/72 on co-ordination of national security systems, which is intended to just influence the first pillar public pension system. But, because of the apparent confusion between the two pillars, the impact of the law could be much wider and affect occupational funds as well, said Nussbaum.
In practical terms, this could mean that people wanting to leave Switzerland with their pension fund intact may be surprised to learn that they will not be able to receive a “lump sum” payment which they can then transfer to another investment fund.
Nussbaum suggested that one solution to this problem would be for the Swiss government to strike up a closer dialogue with the EU
in order to consider how
European directives could be extended to Switzerland to resolve the problem.
Although Switzerland remains outside the EU and therefore does not have to comply with its rules, most of the time the country tries to strive for some sort of compliance with the 25 nation club.
There have been signs this summer that Europe’s approach to dealing with the looming pension crisis is finding favour elsewhere in the world.
On 5 September, social affairs commissioner Vladimir Spidla signed, with his Chinese counterpart Tian Chengping, a memorandum of understanding for co-operation in social security between the two trading partners.
As part of the co-operation agreement, China and the EU each pledged e20m in a project aimed at promoting European-style pension coverage in certain regions of the country, and to encourage mobility among the workforce.
A spokeswoman for Spidla said that a team of experts from the EU would provide assistance and know-how in implementing mobile pensions, in order to ensure that migrants get their pensions wherever they are.
The spokeswoman added that this initiative was part of the EU’s wider efforts to boost working conditions in the country and to contribute to China’s economic stability.
Meanwhile, the Ukraine, which suffered political turmoil over the past weeks as President Viktor Yuschenko was forced to sack his entire government, is looking at what can be learned from the EU about pension reform.
Over the summer, the country sent a number of its top advisers on pension reform to the UK and the Netherlands, to study how the way that these two developed pensions markets work.
At the end of September, the government-funded Ukraine Pension Reform Implementation Project will hold a conference on what to do about the country’s unwieldy pension system.
Roger Vaughan, a senior policy advisor for the group, said that the Ukraine has already created a first and third pillar pension system, but must now concentrate on setting up the second pillar.
He said: “The overall way that the framework is moving is towards the EU and away from the Russian system. Our pension reforms must take in the European perspective.”
Vaughan added that another reason the country is looking towards Europe’s pension model at the moment is because it still has one eye on EU membership, and knows that it must make some fairly radical changes before any future membership bid could be considered.
The Ukraine Pension Reform Implementation Project has invited Chris Verhaegen, head of the European Federation for Retirement Provision, to talk about pension developments in the EU.