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European Commission moves on cross-border pensions

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  • The European Commission

Legislation to give workers occupational pension rights when they move to new jobs across EU borders is being cleared through the Brussels rule-making machinery, but the final outcome is unlikely to enter into force until at least 2018.

The development comes with agreement by member states and the Parliament’s Employment Committee.

The accord is expected to be confirmed by the European Parliament in plenary session, at a meeting planned formerly for February 2014.

However, this has since been put forward to April, that is, shortly before the elections, due in May.

History of the move goes back at least to 2005, when a text was presented by the European Commission. That version was revised in 2007.

But legislation was then blocked by member states, meeting in the Council, for almost seven years, according to a statement by the Parliament.

Now, following endorsement by the Parliament, governments will have to meet a four-year deadline for transposing the Directive into national law, the statement continues.

It adds: “This agreement follows many years of difficult negotiations. Under the compromise agreement, the Directive would only apply to workers who move between member states; however, [they] may extend these standards also to workers who change jobs within a single country.

“Currently, occupational pension scheme rules in some countries mean people who change jobs after less than five or even 10 years will not earn any occupational pension rights.”

The delay problem is described in a Parliament press release as “due to differences among member states’ pension schemes and the unanimous vote requirement [then]”.  

Under the new rules, the ‘vesting period’ of a pension scheme must not exceed three years, according to the release.

The period refers to active membership of a scheme needed for a person to retain entitlement to a supplementary, or occupational, pension.

Ria Oomen Ruijten, the Dutch centre-right MEP, said the legislation would “help to eliminate barriers to the free movement of workers”.

She is prime mover of the legislation and a substitute member of the Parliament’s Committee on Employment and Social Affairs.

Her office has confirmed with IPE the generally accepted fact the delays were due to a lack of political will from Germany.

Meanwhile, Paul Bonser, partner and UK retirement practice leader at Aon Hewitt, said: “Anything that improves the portability of pensions in the EEC is a good thing.”

Significantly, he notes that, already, an increasing numbers of large international employers are setting up cross-border pension funds for their European workforces.

PensionsEurope pointed out that opinions differed among its members, as some were more affected by the legislation than others.

The federation’s policy officer, Corianne van de Ligt, said: “In general, we can say the agreement is all right by us.”

However, she added that a certain article – Article 5 (3), which covers compensation to a worker with a capital sum in compensation in certain conditions –might create extra costs.

As for any benefit to the EU economy, Brussels think tank specialist Mikkel Barslund, at the Centre for European Policy Studies, said the Directive could be an issue for large companies.

“I don’t think it would affect the EU economy much,” he said.

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