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Lack of consensus on pensions portability

The European Parliament and Council of Ministers have been trying to get to grips with the portability of pensions directive, but, with so many divergent views on the dossier, consensus looks as far away as ever.

Dutch MEP Ria Oomen-Ruijten, parliamentary rapporteur for the new legislation, issued her first draft report on June 21, prompting consternation from some quarters that she seemed to be taking a few steps backwards from some of the elements that had been put forwards by the EC. Of particular concern for many was the fact that Oomen-Ruijten’s report rejects the exemptions that the Commission had wanted to include for certain pay-as-you-go systems, such as book reserves. The EU executive claims that, without these exemptions, the new directive would be too costly and unwieldy for some countries.

The rapporteur, on the other hand, says that such a pick-and-choose approach will ultimately weaken the new rules and undermined the level playing field for pensions that the EU is trying so hard to create.

Chris Verhaegen, secretary general of the European Federation for Retirement Provision (EFRP), recognises the need to create a level playing field for pensions, but says that simply ignoring the differences between national systems, as Oomen-Ruijten seems to be doing, will not make them go away.

“We have said from the very beginning that more thought should have been given to the directive,” Verhaegen said. “With over 100 amendments tabled so far in the European Parliament and the many reservations expressed in Council, the issue is becoming far too complex to be dealt with by adjustments here and there. We think that it is now time to go back to the drawing board, having had this experience and got a clearer position of where we are.”

Oomen-Ruijten’s draft report finds even less favour with institutions in Germany, where book reserves account for two-thirds of pension assets. Klaus Stiefermann, managing director of Germany’s occupational pensions association (Aba), told IPE: “We cannot accept this part of the rapporteur’s report. We already have a problem with 40% of all employees in Germany not having an occupational pension at the moment. This directive will just make the situation worse.” There were other areas in which Ria-Oomen took a different tack from the Commission.

For one thing, the rapporteur suggested that the new rules should only apply to newly-allocated pensions and not existing schemes.

This amendment seeks to placate those who fiercely oppose a complete scrapping of exemptions in the directive. Oomen-Ruijten also wants to see this directive on national statute books as soon as possible.

The original Commission proposal said that, where necessary, a member state could apply for a 60 month extension period before they have to grant full transferable rights to employees. Oomen-Ruijten proposes slashing this period to 24 months.

In order to account for periods of unemployment, Oomen-Ruijten also recommends allowing workers to transfer their pension rights within six months of starting a new job rather than, as the Commission suggests, 18 months of leaving the old one.

Discussions aren’t all that better in the Council. Finland took over the Council Presidency in July, and optimistically said that it hoped to reach agreement between ministers before the end of its six month tenure.

But the latest Council working group report shows that crucial differences still remain between member states.

The main area where work needs to be done to find a common ground is the question over whether certain schemes should be excluded from some of the provisions of the new legislation. Oomen-Ruijten has already made it clear that she doesn’t think they should be, whilst member states such as Germany say that, if they are not, company pension schemes will not be able to cope with the additional costs.

Other delegations in the Council suggest that a middle-ground could perhaps be found, where some schemes could be treated differently under the directive, without being completely exempted from its reach.

Some member states also worry that certain provisions in the new legislation could limit the dialogue between companies and social partners over transferability rights, especially when setting the upper limits to waiting and vesting periods. Scandinavian countries, where there is a strong tradition of social dialogue, were particularly concerned here.

There is also a question mark hanging over whether to allow the transfer of vested pension rights to other financial institutions (so-called third pillar schemes). There has also been much fuss within the Council over the definitions used in the directive, given that pensions terminology varies considerably between member states.

Delegations are also split over whether the provisions of the directive should be extended to cover the self-employed, which were left out of the Commission’s original proposal in the belief that, if the directive had too wide a scope, it would have serious difficulties getting through Council and Parliament.

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