The European Parliament has toned down proposals for a long-term goal of “establishing community-wide pan-European pension schemes,” in favour of implementing: “European pension funds open to workers from a given company or group that has several office in members states.”
In its April 13 response to May 1999’s EC communication: ‘Towards a single market for supplementary pensions’, the parliament threw its support behind reform of national disparities in the tax treatment of pension products.
The parliament noted that the: “complexity and specific characteristics are major obstacles to labour mobility and freedom to provide services in the union.”
Urgent co-ordination of prudential rules to avoid serious distortions of competition amongst cross-border suppliers of supplementary pension schemes, were also stressed.
However, the parliament stopped short of recommending a tax neutral, pan-European pensions framework.
Welcoming the proposed elimination of obstacles to free choice, movement of persons, services and avoidance of double taxation, the parliament also says it recognises that levels of tax relief remain matters for individual governments.
Chris Verhaegen at the European Federation for Retirement Provision (EFRP), comments: “I think we can be satisfied with this. Clearly the parliament is calling for European pension funds for companies operating cross-border, but it is less spelt out this way.”
The parliament also voted in favour of the ‘prudent person principle’, albeit with: “strict qualitative supervisory rules, noting that quantitative investment restrictions have proved” counter-productive, while generating sub-optimal performance.”
Parliament also suggested different rules be applied for internal and external supplementary schemes, with book reserve plans made to provide a guarantee against insolvency.
And while noting the benefits of defined contribution pension plans for SMEs (small & medium size enterprises), recommendations were made that plans covering biometrics risk be given preference in any future framework.
“If this need is not addressed there is a risk that a large number of future pensioners in the union will not be reached,” the parliament says.
The Commission is currently circulating a confidential second draft of its directive for commentary and is scheduled to issue a final paper in June. Hugh Wheelan