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IPE special report May 2018

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Council adopts Portability Directive one month after major move on IORP

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  • Council adopts Portability Directive one month after major move on IORP

EUROPE – The European Council has finally adopted the Pension Portability Directive, eight years after the European Commission first published the legislative proposals and only one month after Brussels agreed to postpone the introduction of pillar one of the revised IORP Directive.

The EU's Council of Employment, Social Policy, Health and Consumer Affairs yesterday reached an agreement on the Commission's proposal for a directive on improving the portability of supplementary pension rights.

Under the agreement, the pension portability directive requires member states to implement minimum requirements for the acquisition and preservation of pension rights for people who go to work in another EU country.

Member states remain responsible for the conditions under which people change jobs within the same country, but the Commission expects them to apply the standards laid down by the portability directive to internal mobility as well.

The commissioner for employment, social affairs and inclusion, László Andor, said the news was "an important step" towards ensuring people could work in another member state without losing their occupational pension benefits.

"People who exercise their right to free movement should not be penalised," he said.

"This is important not only for the mobility of individuals but also for the functioning of a genuine EU labour market.

"I now urge the European Parliament to adopt the Directive as soon as possible."

The directive will now have to be adopted by the European Parliament before each member state implements it.

The agreement reached yesterday after eight years of negotiations between the Commission and member states represented in the Council comes just one month after the commissioner for internal market and services, Michel Barnier, announced a delay in the introduction of pillar one of the IORP II Directive.  

IPE reported last month that a number of EU member states would be willing to reach an agreement with the Commission on a proposed Pension Portability Directive only if Brussels agreed to drop pillar one of the revised IORP Directive.

"Some countries are currently negotiating the implementation of the Pension Portability Directive, for which voting is imminent," two sources told IPE at the time.

"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."

The Commission first introduced a proposal for a directive aiming to improve the portability of supplementary pension rights back in 2005.

The directive intended to achieve a greater level of harmonisation in vesting periods and the transfer of pension rights.

It also sought to establish a common requirement to ensure dormant contributions from past employees were fully inflation-proofed.

However, taxation issues arose among member states, as, from one country to another, pension contributions are often exempt from taxation, while pension benefits are taxed.

In 2007, the Commission's project failed to reach unanimity from all member states represented in the Council, and the Commission was forced to revise its portability directive, excluding provisions on transferability to focus on vesting periods and dormant rights.

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