EUROPE - Pension scheme members should not be forced to take an annuity in retirement, but instead be allowed a degree of freedom in how they spend their capital - provided it is used to provide lifelong benefits, according to European Parliament rapporteur Othmar Karas.
Presenting his findings on the forthcoming directive for occupational pensions to Parliament’s European Monetary Affairs Committee (EMAC) today (March 21), Karas notes that while there are sound arguments in favour of mandatory annuities, they should not be the only choice available.
Pointing out that the annuity provision itself need not necessarily go through the institution for retirement provision (IORP) either, Karas adds: “ The conclusion of a pension contract with another, possibly cheaper, provider is also conceivable.
“ Moreover, there may be cases in which the payment of the capital in a lump sum better serves the purpose of guaranteeing financial security, for example if a person buys a place in a retirement or nursing home.”
And Karas says that in the event of any discrepancies, member states should be able to impose tax penalties for inappropriate use of the capital.
Nevertheless, he stipulates that the payment of a lifelong pension must be offered as a benefit by the IORP, provided that the sponsoring undertaking has not already given a corresponding pledge.
He also argues that due account of the problem of differing life expectancy between men and women can be made by legislating to ensure annuity payments are not made contingent on the sex of the person concerned or the state of their health.
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.