EUROPE – The European Commission’s new pensions portability proposal – officially unveiled today - has come in from criticism from several quarters.
The proposed directive, unveiled today in Brussels, gives EU employees the basic right to take accrued pension benefits with them when they change jobs after a two-year vesting period. The Commission estimates that one out of three workers in the former EU-15 changes jobs every five years.
“If we expect workers to be mobile and flexible we cannot punish them if they change jobs. Pension rights must be fully transferable. This directive has been long overdue,” said Vladimir Spidla, the European employment and social affairs Commissioner.
But the measure has met with at best qualified support from the European Federation for Retirement Provision and outright hostility from German unions.
The EFRP said it still has many reservations about putting the concept into practice because of the diversity in occupational pension schemes and types of funding vehicles in the EU.
“Increasing the coverage of affordable and adequate occupational pension provision calls for simplification and cost-effectiveness,” said EFRP chairman Jaap Maassen. “Increased costs ultimately mean lower pensions unless contributions increase significantly.
“And, increased contributions would risk endangering the competitiveness of the European economy.”
And Germany’s political left and unions teamed up to berate the Commission for changing the proposal to suit employers.
Due in part to lobbying by the German Employers Association (BDA), the Commission allowed for an exemption for book reserves pension when accrued entitlements are transferred. The exemption, according to the EFRP, does not apply for qualifying and vesting periods, mininum age requirement or preservation of dormant rights. The exemption will be reviewed after ten years.
As book reserves account for two-thirds of the €366bn in German pension assets, the employers feared that barring the exemption, their costs would have exploded. BDA was assisted in the lobbying effort by aba, Germany’s occupational pensions association.
Germany’s left-wing Green party criticised the exemption, arguing that as a corporate pension is the sole property of the employee, employers may not decide its fate.
By preserving the predominance of book reserve pensions in Germany, “the exemption also hinders the modernisation of the German pensions industry,” the Greens said. The Greens’ remarks were echoed by the Association of German Trade Unions (DGB).
As reported by IPE, the Commission has also sought to pacify Germany’s BDA and aba by watering down a requirement whereby employers would be required to protect the value of accrued pension benefits from the effects of inflation. It did this by not specifying the mechanism for protecting the benefits.
Assuming approval by all EU bodies, including the EU Parliament and the EU Council, member states will have until July 2008 to implement the directive.