This year's new European Parliament and Commission provide an opportunity for a review and rethink of pan-European pensions

In June some 350m European citizens will be called to vote for their national representatives to the European Parliament. In recent years it has been upgrading its role in European political debates, notably in the areas of pensions. And a recent poll suggests European voters have clear ideas about the themes that should be given priority in the political campaign. One-third identified ‘the future of pensions' as a campaign priority, according to the last Eurobarometer, the independent pan-European public opinion survey carried out across all 27 EU countries. Moreover, pensions continue to appear among Europeans' top six concerns - even more than taxation. However, the same poll found pensions at the bottom of the list of policies to be dealt with by the EU, respondents overwhelmingly seeing the national level as a more adequate platform of intervention.

The ambivalence of these messages highlights the expectations and fears that EU policy makers should address if they want to avoid an even lower turnout than the 2004 Parliament election when 190m failed to vote. And later in the year a new European Commission will be established after contacts among national governments and a vote of confidence by the newly elected Parliament.

It would be useful for the credibility of both institutions if over the next six months the Parliament and the Commission were each to give a thorough assessment of what they have delivered over their previous terms of office and what they see as the critical gaps in key policy areas.

Social security and occupational pensions should be one of those areas of investigation. Understanding EU activity in this area is more difficult than in other policy arenas because on the one hand the organisation of social security and the design of pension plans are the prerogative of each member state, while on the other the EU regulatory framework in this field is essential to achieve one of the main planks of the EU's raison d'être - the free movement of workers and of services.

In addition, several departments and bodies with varying levels of empowerment and accountability intervene in this field as part of the EU ‘order'.

But the man in the street is not alone in losing faith and patience in the EU Babel. The uses business and the financial services industry have made of legislative instruments put forward at the EU level to deal with occupational pension issues are disappointing. The relevance and adequacy of the instruments are often questioned for a lack of transparency of national implementing measures and an understanding of the scope of the EU legislative vehicles in place.

Despite an increase in cross-border pension funds established in 2008, they remain an exception rather than an obvious opportunity to be scrutinised by HR and finance leaders. With companies rationalising costs and scrutinising governance and risk management measures, this kind of option should not be dismissed.

On this front, a plain, fair and articulated communication of the EU's achievements and failures, including a view on the reasons for such failures, should go beyond EU institutional communication and Brussels-centric jargon. This is not a job that the institutions can do alone, but they should lead the way, enabling a thorough understanding of the people and business rights due to be guaranteed by the EU.

The fields of social security and occupational pensions provide compelling examples of both what the EU does and what remains to be done, if only to overcome national-specific bottlenecks due to be removed by legislation.

As a precondition of good administrative practice in the field of occupational pensions, before putting forward any new legislative changes the Commission could make available a user-driven toolkit based on an accurate due diligence of each of the six main planks of the existing EU regulatory framework. These relate to:

Enhancing employee mobility; Safeguarding members' minimal pension rights in case of sponsor insolvency; Guaranteeing non-discriminatory treatment of pension plan members; Assessing member state policy reforms towards adequate, sustainable and transparent pensions; Ensuring pension fund freedom of establishment, cross-border affiliation and financial service provision, backed by investment principles and funding rules standards; Safeguarding the neutrality of national tax regimes applicable to foreign-based pension fund, sponsors, members and beneficiaries.

Institutional reporting is already scheduled in some of these areas for 2009, as in the case for the forthcoming joint Commission/Council report on social protection and social inclusion.

An indication of the usefulness of the work underway can be gained from the preparatory work released by the Commission's social protection committee about privately managed funded pension provision and its contribution to sustainable pensions. Another indication is offered by the reporting on specific provision of the application of the IORP directive adopted in September 2003 and transposed into national laws by 2007.

It would be a missed opportunity for the effectiveness of the EU system if the Commission, which has direct responsibility for monitoring the effective implementation of EU rules, were to follow a bureaucratic and narrow approach in such reporting. But even with the best intentions, this will not happen without a more adequate allocation of personnel to the relevant departments by the Commission.

The Commission has made notable progress in guaranteeing a level playing field between national and foreign-based parties in the taxation of occupational pensions. At the last round of infringement procedures in November 2008, the Commission formally requested the UK to amend legislation that in certain circumstances denies deductibility of pension contributions paid to pension funds established outside the UK.

On the same day, Spain and Portugal were referred to the European Court of Justice for their rules under which dividend and/or interest payments to foreign pension funds are taxed more heavily than those payments to domestic pension funds.

EU legal developments can bring real benefits to companies providing occupational pension to their employees. Multinationals with operations in different EEA countries can benefit most from new tools made available by EU policymakers. They offer an opportunity to move away from national ‘silos' and legislative barriers that have blocked the establishment and management of cross-border pension funds.

A business-friendly environment for occupational pensions is even more important at a time when the scope of state pension benefits is shrinking.

This is really a Copernican revolution for several national legislators and tax authorities that until now have resisted the application of single-market principles to occupational pensions. For the first time it is possible to have a single fund covering plans in multiple countries. It gives businesses freedom of choice across 30 different countries on three crucial factors that are instrumental in guaranteeing administrative simplification, cost-effectiveness, transparency and investment efficiency. First, businesses can chose where to set up their pension fund irrespective of the location of their employees or of their corporate headquarters. Second, businesses can choose their service providers on a best-in-class basis rather than on nationality. Third, businesses can design and apply the most adequate investment policy on the basis of the prudent man principle and free of national constraints.

An increasing number of cross-border pension arrangements has been registered by companies with the chosen authority - 70 cases by June 2008, according to the Committee of European Insurance and Occupation Pension Supervisors.

Among potential gains are reduced operational risks and costs, simplified governance, and operational oversight with fewer providers and interfaces to manage. Such arrangements may also reduce net liabilities as deficits are offset by surpluses. And direct cost savings can be made thanks to more controlled and efficient asset solutions, improved economies of scale and reduced internal management time. Legislators have opened the doors and the true challenge is to translate this opportunity into practice and re-engineer a pension policy and platform that meets both corporate requirements and strategies, and employee retirement needs.

Leonardo Sforza is head of research and European Union affairs at Hewitt Associates