Those interested in cross-border pension provision will remember the European Institutions for Occupational Retirement Provision, (EIORP) 2005, intended as a ‘practicable concept for a pan-European pension fund’ to save the European pension fund industry up to e10bn.
Having unveiled its 84-page model in December, the European Federation for Retirement Provision (EFRP) brought it to the attention of EU internal markets commissioner Frits Bolkestein.
Federation chairman Alan Pickering says: “Our proposal addresses the needs of millions of European citizens and their employers.”
This year, EFRP’s secretary general Chris Verhaegen told IPE, the report has been presented to various EU bodies, including the European Commission’s tax department and the employment and social affairs directorate, and the Pensions Forum in Brussels and has been “strongly welcomed by the Commission and members states”.
Verhaegen says that although the federation was “in constant contact” with the Commission, it did not expect to get official feedback.
“The report engenders interest. I think it already had in impact and by presenting it we keep the debate going,” she says. “We see the report as a seed: it will grow.”
But the federation is not only busy with the EIORP. Half a year after its unveiling, Pickering outlined to IPE the federation’s programme for 2004. At the heart of the EFRP’s agenda are liaising with similar organisations in the new EU countries and following the implementation of the EU pensions directive.
The EFRP, which developed from national associations with members in over 20 EU-member states and four non-EU members (Croatia, Iceland, Norway and Switzerland), is also involved with the debate on international accounting standards and the issue of corporate governance.
Pickering told IPE: “Our current priority is to help see the implementation of the pension directive in each EU country in a way which will facilitate good quality within each country and allow people to do cross border what they can do within borders.
“We would like each member state to implement the directive in a way that suits its culture and social priorities, but to do so in a way that meets the European vision of pension arrangements, pension provision.”
The second aim is improving its links with similar associations based in the new member states. “We think we have things to learn from them and I think they might be able to learn from the mistakes we made,” Pickering says.
“So far we have members from Hungary, Poland and from Croatia, which will join in the next enlargement. I personally consider with admiration the way in which the Poles and the Hungarians adopt a pragmatic approach to make cost effective pensions. It is illuminating to see changes quickly made.”
He adds that countries “with longer pensions pedigrees” sometimes could be victims of their history. “We have loads of historical luggage, which means we almost have to unpack the old things and pack up the new luggage. In the new EU countries they are less prisoners of history than us.”
These two points, he says, are the core of this year’s activities but the federation has also time for the ongoing debate on international accounting standards.
In May the EFRP sought membership of the European Financial Reporting Advisory Group’s (EFRAG). EFRAG is a private sector initiative looking at financial reporting in Europe and was set up by users, preparers and accountants, with the aim to give contribute to the International Accounting Standards Board (IASB).
The EFRP says that at its board meeting in Berlin on 24 April, it had confirmed its support for a set of Europe-wide accounting standards that give investors the “clarity that they need while avoiding a complex bureaucratic super structure for employers”.
Explaining ERPF’s stance on the IASB, Pickering says: “The EFRP takes the view that Europe needs a common set of accounting standards. These standards need to play fair by all stakeholders. It is a case of trying to produce accounting standards which are transparent, not standards that are so rigid that they end up implementing behaviourism. The accounting standards should measure behaviour rather than overtly influence behaviour.”
At the same time, the federation is keeping an eye on the European Commission’s decisions on corporate governance which is likely to be one of the hot-themes of autumn 2004.
On June 15, the Commission published the results of its consultation, Fostering an Appropriate regime for the Remuneration of Directors, carried out in 14 countries in total including 12 member states. The Commission said it would bring forward a recommendation on directors’ remuneration after the summer break.
Bolkestein commented that the recommendation would contribute to creating “a truly pan-European securities market which inspires investor confidence”.
Speaking of how important the issue is for pension funds Pickering says: “Pension schemes are in the middle of the corporate governance debate. Our aim is to make sure that the debate has more to do with
substance. Corporate governance, if anything, is running a company efficiently, profitably in a way which ought to help the European
economy. It is important that
people who run companies have
due regard to wider implications of their activities, but most of all it is important not to create corporate governance infrastructure which destroys value.”
Pickering stresses the debate on corporate governance should result in a balanced approach. “There are many different interest groups, each with their own view as to what is meant by corporate governance. Some of these groups are single-issue pressure groups,” he says. “Nothing wrong with single-issue pressure groups, but we mustn’t create a system which means that people who should be running companies are running questionnaires on corporate governance. We have to get the balance right – good corporate governance can add value, too heavy corporate governance van destroy value.”
The chairman comments that no EU country has “got it right yet” when it comes to corporate governance. “I am not sure we will ever get to the point where we say ‘this is right – let’s stop’. We always have to look at how companies are managed and how their activities are reported to the wider community,” Pickering says.
The future of the European second- and third-pillar, Pickering forecasts, will see the two eventually becoming complementary rather than competitive.
“My vision is that workers of the future will be able to mix and match second- and third-pillar’s pension coverage in a way which suits them, but I think the workplace remains the optimum environment where most people can arrange most of their pension-provisions”
European workers are slowly coming to terms with the need to save more for their pensions, he points out.
“It is coming, but it is coming slowly. We cannot carry on assuming that our life span is going to last as the biblical three-score years and 10.”
The EFRP’s secretariat is based in Brussels, Tel: +32-(0)2-289 14 14
Fax: +32-(0)2-289 14 15, e-mail: