Deadline doubts over EU directive
Two MEPs are to confront the European Commission over member states’ failure to implement properly the EU directive on occupational pensions once the September 23 deadline has passed.
At a meeting of the European Parliamentary Pension Forum in June, Dutch MEP Ieke van den Burg and Austrian MEP Othmar Karas signalled that they would be writing to the Commission to ask which member states failed to implement the directive within the given timeframe and why.
Karas was the rapporteur for the directive – officially, Institutions for Occupational Retirement Provision – to the Parliament.
Van den Burg said it was important for the Commission to keep Parliament informed of progress in this respect.
The Commission maintains that all member states will meet the deadline. Ivo van Es, the Commission official in charge of the implementation of the directive, told the meeting: “We fully expect all member states to fulfil their obligations. We can’t allow member states to be late.”
However, van Es did concede there could be some danger of slippage in certain member states, and hinted that the emergence of new governments in some countries would put pressure on the implementation timetable.
The Commission has held two expert meetings recently, one in October 2004 and one in April 2005, to assess the state of progress in member states and offer support to those countries that are falling behind.
Chris Verhaegen, secretary general of the European Federation for Retirement Provision, expressed a somewhat different view, saying that it now seems likely that no member states will meet the September 23 deadline, although she says that most will have the legal framework in place.
Van Es pointed out that one of the key difficulties with getting the directive on to member states’ statute books is that it sits somewhere between financial services and social security. “Countries tend to become very edgy when they see the EU trying to impinge on their pensions systems,” he said.
He added that his department has worked on the directive from an internal market, rather than social services, point of view, and insisted that it should be implemented in a way that is consistent with the principles of free movement of services.
q The European Commission has promised to look into how the new way of accounting for non-cash assets (including pensions) on balance sheets may be damaging the ability of companies to pay dividends.
Some companies - which have been re-running their 2004/-2005 company accounts under the new IFRS system in order to avoid surprising the market when they come to use IFRS for real - have registered a marked decrease in their assets, caused largely by the new way of recording non-cash elements such as pension deficits on the balance sheet.
According to Reinhard Beibel, a project manager at the European Financial Reporting Advisory Group, which provides advice on the standards, this could make it harder for companies to pay dividends. Under European law, companies can pay dividends only if they have positive distributable reserves, but including non-cash items on balance sheets can cut these reserves, Beibel said.
In a statement on 25 May, retailing giant Tesco said it had suffered net asset losses of £400m(E602m), mainly due to registering a pension deficit of £735m. Tesco said that it had suffered actuarial losses of £230m on its defined benefit scheme after applying the amended IAS19 to its 2004/2005 accounts.
The large impact the introduction of non-cash reporting may have on some companies’ profit figures could affect on the investment strategies that pension fund managers use, said a spokesman for the National Association of Pension Funds (NAPF) in the UK.
On 20 May, the Accounting Regulatory Committee, an EU advisory body, asked the commission to look at the effect that reporting non-cash deficits on company accounts could have on the ability of a company to pay its dividends.
The commission said it would not comment on the study before it has been completed, but Beibal remarked that the likeliest outcome will probably be an amendment of the existing company law directives that calculate how firms can pay dividends.
q The commission says that it will present an evaluation of the open method of co-ordination (OMC) later this year, based on the results of a consultation that will conclude at the end of June.
The OMC is generally held up as an invaluable tool in furthering social protection systems, which generally remains a national rather than European competence. It was extended to cover pensions in 2002. But it is felt that it is now time to look at whether its effectiveness can be approved.
Geert Decock, policy adviser at AGE, says that the OMC has generally proved positive for pensions but that there is scope for a broader range of studies to be carried out, particularly on the adequacy side of pensions, such as how dwindling replacement rates will limit the amount of money available after retirement.
He also points out that while the commission has been good at consulting with interested stakeholders, the same cannot be said of national governments, which often leave older peoples’ organisations out of the loop. “They say it is an open method of co-ordination, but it is not always open at national_level,” asserted Decock.