EFRP: Its role over the years
Colin Steward traces the developments of the Federation
The EFRP (European Federation for Retirement Provision) was established in 1981. Its objectives have changed little over the ensuing 18 years. Currently they are stated to be:
o to safeguard the welfare of all pensioners within the EU and EEA without jeopardising the competitiveness of European
o to achieve a balance between the statutory social security pensions (ie, first pillar pension provision) and second pillar occupational pension schemes, whatever form they may take. The EFRP is striving for a harmonious combination of state and occupational benefits in each member state;
o to ensure a proper balance between the social protection of pension fund beneficiaries and the efficient financing of the liabilities, both at national and company level;
o to promote mobility of the European workforce by ensuring that second pillar pensions do not create obstacles to such mobility;
o to remove any unnecessary investment restrictions within the member states above those needed to prevent concentration of investment in either a single asset or the sponsoring employer(s);
o to ensure that pension funds enjoy the full freedoms of the Treaty of Rome and that their cross border activities are not indirectly penalised through taxation or regulatory provisions.
For a number of reasons, there are different methods of financing occupational pension arrangements throughout the EU and EEA – in several member states more than one method is found. Although the founder EFRP associations were primarily acquainted with segregated funding methods, EFRP promotes all current financing mechanisms for occupational pension arrangements in all member states and it supports the removal of any restrictions which exist as deterrents to alternative methods of financing.
The Federation supports the provision by the state in each member state of a minimum level of income in retirement, which is sufficient to provide every citizen with a reasonable basic living standard. It supports retirement provision supplementary to that provided by the state, not as a substitute for state pensions, but in partnership with state systems. It urges each member state to arrange favourable tax provisions to encourage supplementary occupational pension provision.
Within the member states, the less generous the provision of statutory social security retirement benefits (the ‘1st Pillar’), the more widespread the provision of occupational retirement benefits (the ‘2nd Pillar’) becomes. Three EU member states between them account for more than 80% of all the assets representing European occupational pension liabilities. These member states are the United Kingdom, the Netherlands and Ireland.
The UK has the oldest pension fund
association in Europe: the National Association of Pension Funds (NAPF) founded in 1923. The Dutch now have two associations – OPF (Ondernemingspensioenfondsen – Company pension funds association) and VB (Bedrijfspensioenfondsen – industry wide pension fund association) founded respectively in 1989 and 1985. But back in 1938, pension funds already had set up various industry interest groups. The Irish association established itself in 1973.
Given, therefore, the respective dates on which the three largest players joined the EU, it is, perhaps, unsurprising that the first move to establish a European association was not taken until after the UK had joined the EU.
Exploratory moves were initiated by the NAPF in the late 1970s, particularly by Raphe Langham of Unilever, a company which played a significant part in the EFRP’s development. A handful of associations were identified as the founder members and the first chairman and director general of the EFRP were the respective holders of those positions in 1981 of the NAPF. They were Maurice Oldfield and Henry James. Apart from a short spell when the secretariat was taken care of by the Dutch company funds association OPF, the secretariat remained within the NAPF until Chris Verhaegen was appointed as its fulltime Permanent Representative resident in Brussels in 1997.
On the face of it, EFRP appears to have little to show for its early years. This is far from the case, however, if one looks below the surface. Back in the early 1980s, most participants knew little, if anything, about the raison d’être of retirement provision in any other member state. So at a time when little was happening within the EU (as far as retirement provision was concerned, at least) the EFRP grasped the opportunity offered by these early years for national associations to learn about each other and the problems in other member states.
This breathing space proved invaluable by 1987 when the EU started flexing its muscles and suggested that pension funds were the same as life insurance companies and, as a consequence, that the Third Life Directive should apply to pension funds. Representatives of EFRP visited European Commission officials and spent much time explaining and convincing them of the difference. EFRP feels justified in considering that this was instrumental in leading, in 1989, to Commissioner Sir Leon Brittan, making his now famous speech calling for the ‘three freedoms’:
o freedom of cross border pension fund management
o freedom of cross border investment
o freedom of cross border membership of pension funds
This was the forerunner of much activity over the next five years or so – a failed ‘pension funds directive’ and a Communication which had to be withdrawn following an ECJ decision. EFRP provided invaluable input – both directly and in providing background facts, data and information to relevant European bodies.
Over the years, EFRP expanded its action through lobbying activities, including the publication of a report about the macro-economic role of pension funds. The Federation became well known within the European Commission. Both these initiatives were led by its then part-time permanent representative, Koen de Ryck.
Since then EFRP has also developed a lobbying capability with the European Parliament and the European Economic and Social Committee (ECS) and has built up a relationship with the European Court of Justice. The latter proved most fruitful when the wider implications of the 1990 Barber v Guardian Royal Exchange judgement were being considered during the early 1990s.
Over the years the Federation has, therefore, gained access to every level of European decision making – and its representatives are consulted both formally and informally on retirement provision issues, be it a benefit or financial matter. The ideas expressed through the EFRP objectives have expanded throughout the EU and are now the object of debate in those member states where statutory social security pensions are under demographic pressures.
The membership of the EFRP has certainly not remained static. The Federation has always held the view that it needs to have representation in all EU member states if it is to be seen to credibly represent supplementary pension provision throughout the whole of the EU. At each stage of EC enlargement EFRP has attempted to keep ahead of the game either by identifying a suitable association in these member states or by encouraging the establishment of an association where there has been none before.
Nowadays all EU member states (except for Italy and Greece) are represented in the EFRP. Also the associations from EEA member states such as, Iceland, Norway and Switzerland have delegates in the EFRP Assembly. Further EU enlargement makes it likely that other pension fund associations will join EFRP in the years to come.
Colin Steward was Secretary of the EFRP from 1989 to 1997. He is now Secretary General of EURACS (European Actuarial Consultancy Services) and Director of Information at Sacker & Partners (UK)