This year’s EFRP/NAPF annual international conference delegates might have no more foresaw two days of solid rain in Barcelona in September than that they would this year be discussing the final implementation of the pan-European pensions directive.
But if there’s anything we’ve learnt in European pensions in the last year, it has been to expect the unexpected.
Chris Huhne, UK MEP for the European Liberal, Democrat and Reform Party, explained the process that would now take place in terms of the implementation of the directive under member state laws and regulatory processes.
He warned the conference, however, not to expect too much too soon. “In my experience there can often be fairly lengthy implementation lags in bringing such legislation to law. These can either be accidental or deliberate.
“There can be problems and often it is because the ministries in member states don’t have sufficient staff to deal with the issues.”
However, he also pointed out that not all delays in implementation were deliberate. He noted that in the case of the UK there were actually two different legal systems to deal with, those of English and Scottish law, meaning a need for two different sets of national legislation.
On the ‘deliberate’ procrastination side though, Huhne flagged up Italy as one of the worst past offenders in terms of ratification of EU legislation. He also fingered France as being a potential lagger on introduction of the pan-European pensions framework, claiming that despite its highly effective public administration system, France had no-one really in Paris to deal with this issue - particularly as it could pose problems vis á vis the EU stability and growth pact. Digesting Huhne’s advice on the next steps towards implementation of the directive, the conference then took an evaluatory step backwards, launching into a panel discussion on whether it had all really been worth it.
Would the directive – once labelled the compromise of a compromise – make much difference in the search for a pan-European pensions solution?
Anne Seiersen of the Danish Insurance Association, kicked off the panel with a perspective from her home market, which she pointed out has a majority of DC plans guaranteed by pensions company and run by insurance companies, most of which are covered by the life insurance directive.
“Most people in Denmark would say that the directive did not change much and we lobbied to that effect.”
And although she broadly welcomed the directive’s usefulness as a framework for prudent person rules and the eventual elimination of quantitative investment restrictions, Seiersen was less enthusiastic about the directive’s potential role as a catalyst for cross-border pensions, stating that she did not think that the directive would change much to this end.
Seiersen also said she didn’t share the current optimism of the European Commission on resolution of the issues of portability and tax for retirement plans. Summing up, she noted: “Was it worth it? Well the direct effect for us in Denmark was pretty limited, but from a more generalist point of view it was worth it for the broaching of the pension question and the possible protection of European pensions in the long run.”
Similarly, Marcello Messori of MEFOP in Italy pointed out that the country’s pensions legislation shared many of the basic features of the directive, albeit with a slightly more
developed focus on the pension plan
“Italy has much of the directive in its pensions law and the majority of Italy’s pension schemes are DC so they are not affected by the more controversial parts of the directive affecting DB schemes.”
So far so undramatic then for the EU directive!
It took a potential user of a pan-European pension plan, Withold Galinat, head of international employee benefits at German giant BASF, to give a more hands-on feel as to just what the directive will or will not mean to European employers.
In advance of the conference, Galinat had taken the initiative to contact a number of multinational peers in Europe to produce a small but well targeted survey of multinational intentions regarding pan-European pensions in the light of the directive.
Presenting the findings of the survey, Galinat revealed that multinationals were divided 50/50 as whether they would now review whether it is currently worth establishing a pan-European pension fund on the back of the new regulation.
Galinat said the survey questioned 36 different multinationals, principally in the industrial sector, regarding their intentions vis à vis the Directive, of which 18 responded - split evenly at six apiece between multinationals from the UK, Holland/Belgium and Germany.
Those responding in the negative, he said, were largely concerned that the lack of resolution in the tax sphere nullified the current potential for pan-European plans.
On average, he said, multinationals ‘strongly agreed’‚ with the proposal that removal of tax barriers would be integral to the eventual success of the directive.
A majority of respondents also ‘strongly agreed’ with the suggestion that the directive would only succeed if national regulators quickly reached agreement on future methods of mutual co-ordination.
Interestingly, multinationals disagreed with the expectation that the Directive would prove to be a boon in the area of investment and custody savings, with most concurring that the new EU pensions law would only provide marginal savings in this area.
While multinationals may appear rather undecided on the effect of the pensions directive, today’s market conditions mean they certainly cannot remain idle on the question of the affordability of their pension commitments.
In a presentation to the conference, Bernhard Wiesner, head of corporate pensions at German multinational Bosch said the firm was actively considering ways to transfer its German book reserve commitments into a funded pension arrangement – a potentially significant shift for any large German corporation.
The move, Wiesner said, would be via the new German Pensionfond vehicle, although he noted that Bosch had yet to see enough efficiency under Germany’s Riester pensions law to actually do so currently.
Wiesner noted that Bosch was only one of two German industrials, Deutsche Telekom being the other, to have set up a Pensionfond for employees under Riester. “We would like to use our Pensionfond for this purpose but the problem at the moment is that the vehicle is insufficient to do this. We need the Pensionfond vehicle to be more efficient.”
One difficult issue with the Pensionfond, said Wiesner, was the question of guarantee of capital. The other, he said, was that there was as yet no possibility for employers to contribute above the Riester 4% contribution ceiling for individual employees.
Wiesner pointed out that Bosch was under no pressure to fund its book reserve commitment, but claimed this was part of a longer-term pensions view of the company.
“The magnitude of the pensions liability is growing in all German companies like ourselves and we have to think about the long-term view. We are discussing this continually at the moment and we believe there is an absolute need for an efficient vehicle for pension funding.”
“These are positive signs of movement in the right direction at the moment, but the legislation still has to be changed. We hope that in the next few months and years this issue will be solved.”

Closing the conference, EFRP Chairman, Alan Pickering, picked up on the importance of moves around Europe to find a sensible framework for pensions that encouraged the continent’s citizens to see the sense in saving for their retirement, noting: “If pension arrangements are sub optimal then it is the consumer /worker/taxpayer that pays the price!”
Pickering then turned towards his own home market, the UK, to firmly counter claims that people in the UK were being “irrational” because only around 50% are currently making any long-term pension provision.
“In fact it is the UK pensions system which is irrational and the response of the consumer is entirely rational compared to the system!”
He moved on to explain his conviction that it was the responsibility of interested parties in Europe to get the appropriate structure for its retirement systems – suggesting a ‘Lamfalussy’ type approach to pensions where the politicians create the system and society is allowed to work rationally inside that.
“When politicians start to micro manage things, then things start to go wrong,” he warned the conference.
But he advised that the task of creating a framework for European pensions should not involve the replacement of one set of regulations with another – a comment perhaps aimed at regulators now charged with implementing the pan-European pensions directive at a local level.
The task of helping to ensure that such legal layers do not stifle the growth of European pensions, he said, was where the EFRP would now focus.
“I think this answers the questions of people who might think the work of the EFRP was over now the directive is on the table.
“There is a lot to play for in the next couple of years and the EFRP will play its role here.”