After a somewhat quiet period, the directive on occupational pension funds is now very much back on the agenda at Brussels. It may be hard to believe but it’s now almost two and a half years since the Institutions for Occupational Retirement Provision (IORP) directive passed into European legislation. Member states then had two years to implement it into their own national laws.
The bottom line is that some have, and some have not – or not fully, in the European Commission’s eyes. There are now 11 countries, including some of the larger nations as well as some newer and smaller members, implicated. And the Commission has indicated that it is prepared to play hardball against the wayward ones.
Earlier, in January the Commission had said 15 EU member states had yet to fully notify it about the transposition
Then in April the Commission, almost seven months to the day after the final deadline, came out and issued a broadside against the non-compliant member states. It came in a so-called ‘reasoned opinion’ – the second stage in an infringement procedure – to the countries concerned. The next step in the three-stage process is to take them to the European Court of Justice (ECJ). That may well be regarded as the ‘nuclear option’.
What the Commission’s latest move means is that almost half of the EU’s member states could be facing action over occupational pensions. Unless the member states meet the executive body’s requirements, the long-held ideal of pan-European occupational schemes will probably remain as far off as ever. What is more, years being bogged down at the ECJ, whatever the outcome, is the last thing the directive needs: after all it’s taken a decade to get this far. The Commission justifies its action by saying the member states are denying their citizens and businesses single market benefits.
The Commission did score notable successes at the ECJ in earlier pension tax discrimination cases, so there is a positive track record there for it to go on.
One thing the Commission didn’t mention is the fact that some countries it says have implemented the directive may not in fact have implemented it in the correct way. On this point, the devil is in the detail – the Commission has a very small team looking at the matter and has to take a certain amount on trust. So the situation may be even worse than the Commission admits.
For the record, the member states are: Belgium, Cyprus, the Czech Republic, Finland, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the UK. It’s an interesting selection – it contains some serial offenders of the ‘transposition deficit’, such as Italy. But the appearance of the UK on the list will raise eyebrows, considering the IORP directive is viewed in some quarters as an ‘Anglo-Saxon’ style measure.
And Belgium’s inclusion is noteworthy because the government there is aiming to set up a legal framework to make the country a domicile for pan-European pension funds, following lobbying from the local pension fund association. Where the Commission’s action would leave these plans is unclear.
Other countries such as Ireland, Luxembourg and the Netherlands have expressed a desire to become pan-European pension fund domiciles. A study by consulting firm Rauser Towers Perrin in March found that nearly half the big companies active in Germany plan to create some type of pan-European pension scheme by 2010 following the emergence of the directive.
With some states now going against the Commission, is there a possibility that regulatory ‘arbitrage’ between jurisdictions takes on more import?
The 11 are charged with not having written directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, into their national laws, or for having done so only partially, the Commission said.
Internal markets Commissioner Charlie McCreevy said the countries were “effectively denying citizens and businesses across Europe the full benefit of the single market and of measures their governments have themselves agreed”.
He added: “The Commission will do all it can to help member states implement laws on time, but will continue to take remedial action where necessary.”
The IORP directive should have been transposed by all member states by 23 September 2005. The reasoned opinions follow letters of formal notice sent in December 2005.
All this comes amid a flurry of pensions activity at the heart of Europe. One hot topic is the possible impact of avian influenza. CEIOPS, the Committee of European Insurance and Occupational Pensions Supervisors, has met to discuss how to minimise the effects of a possible bird flu pandemic on the industry.
The meeting followed a warning from the IMF that pension and insurance regulators would need to be on watch if the disease hit financial markets. They might need to exercise “temporary forbearance” as markets tumble.
And meanwhile, members of the European Parliament’s economic and monetary affairs committee have voted against proposals to bring UCITS investment funds within the scope of the directive on occupational pension funds.
The proposals had been brought
by Austrian MEP Othmar Karas, who was the original parliamentary
‘rapporteur’ for the pension fund directive.