LUXEMBOURG/EU- European finance ministers have accepted a compromise position on the EU occupational pensions directive in a move that will finally enable companies to launch pan European funds.

The decision by ministers to accept the proposed law ends a four year debate on the precise wording of the directive. The compromise, drawn up by the Spanish presidency, treats pan European funds differently to national pension schemes.

Domestic pension funds will be obliged to stick to local legislation while European funds will be subject to a number of relatively lax investment restrictions.

France had been pressing for the inclusion of more quantitative restrictions on funds’ investments until the meeting on Tuesday when it relented and agreed to support the legislation in its present form. The directive will now go back to the Parliament in the Autumn for approval.

Debate between member states heated up under the Spanish presidency after it recommended the inclusion of investment restrictions and solvency tests.

UK and Dutch delegations lobbied for the prudent man principle, as agreed by the Parliament last year, but the compromise brought on board countries, including Italy, Portugal and France, keen on a more structured investment approach.

The Spanish Presidency has been pushing for completion before its tenure runs out at the end of this month.

Alan Pickering, chairman of the European Federation for Retirement Provision, praised the Spanish Presidency saying: “it was preceded by more than six months of deadlock on the pension funds issue. Therefore, it is all the more laudable that the hard work of the Presidency and the Council freed the logjam, opening up the way to political agreement.”

Frits Bolkestein, EU internal market commissioner, welcomed the political agreement and said it could save a company such as BP up to e40m a year.

The ERFP also congratulated Bolkestein for upholding the prudent man principle- earlier this year the commissioner threatened to drop the directive if it became too restrictive.

As expected, European funds will be limited to investing no more than 5% in shares belonging to a single company, no more than 30% in unregulated markets, nor more than 30% in assets denominated in a currency outside the Eurozone.

One disappointment was a refusal by the Belgian delegation to agree to the directive and lift its opposition to the exclusion of further restrictions. In practice, however, the objection will have no affect. “The Belgians are now isolated but the text is closed,” says Chris Verhaegen, secretary general of the EFRP.

The Belgians have some time to decide whether to back the directive but are believed unlikely to come around. Its opposition has postponed a formal majority vote until the Seville EU summit on June 21.