The Strasbourg-based Council of Europe is set to reinstate its funded pension scheme more than 25 years after the original fund was wound up, in a bid to cover looming deficits in the current pay-as-you-go (PAYG) system for financing retirement.
The original fund, which was created at the inception of the Council in 1949, was closed in 1974 and cashed in by member states, which agreed to transfer to the PAYG system.
However, Alan Todd, finance director at the Council, says that with the increase in pensioner members over the years the original surplus gained from closing the fund has run out.
“This saving lasted for about 20 years but has now run out with the result that the contribution of governments today is more than twice that of members in order to pay the pensions.”
Todd says that around 1,200 members could join the new pension scheme, which is projected to reach e50m in assets by 2010, if they get the green light from member states.
“The financial situation is going to get worse, so now we hope we are on the point of re-establishing a fund and with a bit of luck by the beginning of 2002 we should be in a position to do this.”
The fund would be a defined benefit plan with contributions split one-third employee, two-thirds employer, although Todd says the employer contribution would be slightly higher to begin with.
He adds that the Council is still examining how the fund’s assets would be managed and how to organise a suitable tender for the outsourcing of the investment management.
The Council’s links to the European Court of Human Rights and to environment and health initiatives, would, he notes, push the fund to invest in ethically and environmental approved companies.
“We should be drawing up a draft statute soon and then looking to draw up the terms of the investment management.
“We’ve set up an advisory committee and supervisory committee and will have invited experts from member states, but the day to day management of the fund will be outsourced and we’re still looking at the question of fee structures etc.”
The Council of Europe represents 43 member states in Europe, with only the ex-Yugoslavia, Bosnia Herzegovina and Belarus not having membership.