Pensions are on the European Commission’s radar again, and three divisions have been given the task of preparing a Green Paper on the creation of an EU framework for pensions by the middle of this year. Pension fund bodies and consultants say they welcome the move to talk about encouraging pensions savings. But there is apprehension about the possible content and concerns about the Commission’s aims, in part because there appears to be a degree of urgency to the process.

The EC’s Employment, Social Affairs and Inclusion directorate-general (DG) is working with Internal Markets & Services and Economic and Monetary Affairs DGs to assess whether there is the need to update legislation, regulation and co-ordination “in light of the ageing population and new challenges stemming from the crisis, to contribute to the safeguarding of European pension systems”.

The 10-15-page consultation paper - now expected in June instead of July as first envisaged - will invite responses to assess how the EU framework should be updated, as part of a move to help member states deliver “adequate and sustainable pensions”.

“We understand it will cover the full range - state, workplace and personal pensions, and non-state pensions will be the greatest focus, on a wide range of issues: regulation, protection for members and some internal market issues such as cross-border parties, along with governance,” says James Walsh, senior policy adviser for workplace pensions at the UK’s National Association of Pension Funds.

“So our view is very much dependent on the content. If it highlights the importance of making retirement savings and risk standards to a high level, then great. But if it proposes more regulation and costs for pensions it would be unwelcome.”

Leonardo Sforza, head of research and EU affairs at Hewitt Associates, says there is need for a top-level review which does not disrupt ongoing work concerning the implementation of the 2003 IORP Directive and still allows member states to set their own social agenda.

“The Commission should look at pension-related issues irrespective of the level and nature of policy responsibility, although on most compelling issues this is fully in the hands of member states,” says Sforza. “Pensions remain consistently over the years among the top five concerns of Europeans and the wide country-specific differences should be seen as a plus for the range of experiences that they bring rather than a limitation. And on the nature of the analysis, this needs to be forward-looking, truly unbiased and more comprehensive than in the past, overcoming the traditional separation by ‘pillars’ of the pension systems,” he suggests.

Interestingly, the Dutch Pension Fund Organisations (VB and OPF) have taken a stronger stance, and suggest work is needed to strengthen pension funds against future financial crises and to protect members, albeit without the prospect of additional costs.
“The regulatory framework for pension funds, the governance of funds, investment principles, communication, transparency vis-à-vis stakeholders and remodelling of pension contracts have to be reflected upon, not only at national but also at European level,” says Sibylle Reichert, spokeswoman for the VB and OPF.

“It is important that the existing steering mechanisms of the pension funds to buffer the financial crisis are strengthened. At the same time, protection of beneficiaries needs to be secured, in a way that the costs of pensions are not significantly increased for the sake of more security. In addition, sufficient securities for DC schemes need to be established,” she suggests.

Even so, any attempt to review European pensions will be an incredible task even for three DGs of the EC, notes the Irish Association of Pension Funds. This is because achieving consensus on how pensions work, and should work, across borders as well as what the priorities should be, is difficult enough for individual member states, never mind on a pan-European level. “The analysis of the issue of ageing populations is welcome but it is not clear what the EC expects the end product to be,” says Jerry Moriarty, director of policy at the Irish Association of Pension Funds.