Othmar Karas, European Parliament rapporteur for the directive on occupational pensions, has a difficult month ahead.
On March 21 he presented his report on the IORP (Institution for Occupational Retirement Provision) proposals of the European Commission to the Committee for Economic and Monetary Affairs (EMAC).
However, he must now sit tight over the coming weeks until the presentation of the taxation initiative of Frits Bolkestein at the European Commission, before EMAC takes any decision on his findings.
And responding to reports that Bolkestein may be set to water down initiatives for a taxation directive, Karas underlines the quandary he finds himself in.
“As I said the two elements are very much connected, even if no strong link between the two texts can be established.”
Nonetheless, he says he intends to push through the directive on the supervision of pensions - for two main reasons.
“The first is related to the fact that we are dealing here with two very different types of procedure; the internal market legislation being adopted with qualified majority in co-decision with Parliament and tax issues being a matter of unanimity and consultation.
“ This means that if the Council doesn’t reach an agreement on taxes, we will not have any legislation at all. This cannot be my intention.”
The second reason, he says, is that he considers the directive to be vital to the internal market on pensions and the creation of a new cross-border pensions system.
“It would not be wise to block the directive and thereby the whole process, which, even if not moving quickly enough in my opinion, is in the right line.
“This directive will create a spill-over effect, which will encourage and accelerate developments in some still problematic areas.
Consequently, Karas says he hopes there will be a vote on the report by EMAC at the end of April in order to be able to go to plenary in June or July at the latest.
In formulating his report, Karas has had time to reflect on the views aired by industry representatives at February’s open hearing of the EMAC committee.
“What really surprised me was the large public interest at the hearing itself and afterwards. This shows the awareness on the importance of this directive and its possible impact on the pensions’ framework in Europe, especially the important step it represents for cross-border membership,” he comments.
He adds that a couple of significant new points put forward during the hearing were of great help in producing the report.
“I very much appreciated the presentation of the Dutch asset supervision and pension fund system made by Dutch supervisory authority, the Pensioen & Verzekeringskamer.
“This system is to a large extent considered to be a model, and I indeed learnt a lot from it. Other interesting points, he says, included the description of the content of the “prudent man rule” as well as its implications with regards to asset management and choice of investments over the long term.
But Karas expresses his “astonishment” that the prudent person rule has led to such controversial discussions. “The concept as such seems to be a matter of large consensus, but I’m not sure whether everybody agrees on the degree of freedom that should be given to asset managers. That could in the end prove a difficult point.”
On the question of biometric risk, he notes that positions are still “rather rigid” within the parliament, but says his report presents a possible solution to this.
“When an employee is offered a pension scheme and these biometric risks are not covered, an option for the coverage of the said risks with a detailed cost evaluation should be given to the employee, leaving them the choice to decide whether they need this supplementary coverage or not.”
Should an institution not able to offer this service, Karas says the supplementary coverage could be arranged via an external provider.
“This option would in my opinion be the best way to enable individuals to adapt their supplementary pension to their personal needs depending especially on the level of coverage in the first pillar.”