Karas gives direction on European directive
Othmar Karas, European Parliament rapporteur for the long awaited supplementary pensions directive, has issued a working document laying out the salient points for debate during the forthcoming parliamentary session.
In the document, the Austrian MEP and representative of Europe’s Christian Democratic Party, flags up the major points for discussion concerning the EC draft directive, on an issue, which is rapidly becoming one of the parliament’s most controversial for some time.
Opposition political parties within the parliament have already begun taking hardline stances over the passage of the directive.
At a December conference, Karas’ fellow countryman, MEP Harald Ettl – a member of the European Socialist party declared that the left would bring the debate squarely on to issues of social protection: “ If biometric risk is not included in the directive then we cannot have this,” he declared.
The appraisal precludes a hearing Karas will chair with a panel of experts from the pensions field, which is expected to include representatives of multinational pension plans, at a meeting of the European Monetary Affairs Committee (EMAC) on February 6.
On biometric risk, Karas sketches out the polemic where a compromise will be sought: “As far as one sees pension funds as complimentary to the first pillar - where such risks are normally covered, it would appear that the inclusion of such cover would be thoroughly justified. This is particularly true in the case of longevity, which is the goal of any pension fund.”
Positing the counter argument, however, on freedom of product choice, he notes:
“It is questionable whether such (biometric) limitations within the context of the guidelines make any sense.”
Karas suggests a halfway house may be found in promoting such biometric vehicles through fiscal incentives.
Commenting on quantitative investment restrictions versus the prudent man rule, Karas concludes:
“ Detailed quantitative principles make it difficult to manage pension funds properly and lead to lower returns.”
But he notes the need for further explanation of the principle:
“ The concept of the prudent man rule without conditions is currently used in many countries, but it is considered that there is questionable translation of this into different languages.”
And on the issue of tax harmonisation, Karas, comments: “The significant steps already taken here must be followed by further measures such as co-ordination of national tax systems at a community level.”
“We have to bring these two issues together (pension and tax reform) so that no-one has the excuse that they are waiting for the other to be achieved.”
European internal market Commissioner Frits Bolkestein is currently working on a European tax initiative, scheduled to be published in April.
Karas has previously stated that a decision on the common view of the parliament will be taken around Easter - prompting a decision in the plenary by the end of April/start of May.
Detailed analysis of the working document will appear in the February issue of Investment & Pensions Europe.