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Portability faces death threats

EUROPE - The European Commission's proposals for an EU pensions portability directive are endangering occupational retirement provision, delegates at the aba-conference were told.

"It would be best if we could 'kill' it for good," said Boy-Jürgen Andresen, chairman of aba, the German association of occupational retirement provision.

The organisation's secretary general, Klaus Stiefermann, agreed saying he "would not mind if the directive did not resurface" after the European Parliament's summer break.

Dieter Hundt, president of the federal association of German employer representatives, warned if the directive should lead to an increase of costs for employers "they will have to consider how to compensate" for this loss of money.

Meanwhile, the European Parliament has yet again postponed the discussion on the directive to the week starting June 18.

Since the commission presented its suggestion last year, the directive was passed through two parliamentary committees and has lost almost all traces of the original focus on the portability of pensions to look more on retirement benefits of former employees and the right to an occupational pension in the first place.

"We should be glad that the likelihood the portability directive will be passed during the German EU presidency [which ends in July] has gone down to zero," Stiefermann said.

He also suggested Portugal, which is taking over presidency from Germany, would be insufficiently motivated to find a compromise on the portability directive.

Portugal is one of the European countries where occupational pension tend only to be paid out to employees who stay with the company until their retirement so any European regulation which forced companies to guarantee a pension to every employee above the age of 25 and who has been with the company for five years would mean a major change for employers.

The aba estimates that costs for companies offering a retirement provision might rise by up to 30% depending on the compromise reached under the portability directive. This in turn would lead to many employers thinking twice about offering a supplementary company pension.

"The EU is trying to take the second step before the first," explained Stiefermann. Before considering portability the second pillar should first of all be strengthened and - even more importantly - "tax issues which are the Achilles' heel of any portability provision" should be solved, he suggested.  

Thomas Steffen from the German supervisor BaFin spotted another European problem regarding retirement provision. He said the IORP directive has "already reached its limits". According to Steffen, who was recently elected as the new head of CEIOPS, the major problem is different countries interpreting terminology like the "fully-funded" status on going cross-border differently.

However, instead of overhauling the IORP directive he wants to see "the valuable core ideas of Solvency II being applied to pension funds" amended slightly to take into consideration the differences between institutions offering pension provision and insurances for which Solvency II was devised in the first place.

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