Portability reforms resurface
Jeremy Woolfe reports on the adoption of European Parliament recommendations in the EU's reborn portability directive.
Following the failure of its predecessor to gain support in the European Parliament, a newly emerged version of the Portability of Pensions Directive takes in the majority of the parliament's amendments. The Commission states that the new draft focuses on setting minimum requirements for better access to pension rights. It also aims to give "clearer rights of preservation so that mobile worker's pensions are treated fairly".
Commissioner Vladimir ·pidla comments on the goal "to break down the barriers to workers' mobility in Europe". The new directive will be put to the Council of Ministers, and then for a second reading in the Parliament.
All this follows years of wrangling.
The problem is the incompatibility between the needs for employees who move jobs between member states to have rights to supplementary pensions preserved, and pension fund investors faced with all sorts of nightmarish obstructions, such as tax disincentives.
Another bone of contention from lobbyists has been that national legislation, which would be replaced by the new draft directive, is often designed to encourage employee loyalty to an employer. And changes to this principle are disliked.
"With our new, amended directive, we propose that vesting should start after one year with the same firm," a Commission official explained. "This means that we are tilting the balance. We are ensuring that mobile workers are not penalised compared with workers that do not change jobs," she added.
In December last year, a diluted version of the pension mobility directive, the so-called Finnish proposal, got qualified support from the EU Council of Ministers. Around that time Jerome Vignon, director in the Commission, described what it was intended to replace the currently effective 1998 Safeguarding Directive as providing "very minimal conditions [to employees]". He said that the origins of the new proposal went back to October 2005. This weakened draft drew protest from figures such as the parliamentary rapporteur, Ria Oomen-Ruijten. The office of the Dutch MEP now tells IPE that the Commission has "taken on board many of our amendments".
Many technical details of the changes in the directive are given in an explanatory memorandum from the Commission. For instance, it states that "a majority of the…amendments [from the Parliament] are acceptable in full, in principle, or in part". It adds that a main feature is to shift the focus of the directive onto the acquisition and preservation of dormant rights and away from provisions for transfers.
The commentary refers to conditions governing acquisitions. The amended draft proposes a maximum vesting period of five years - where stipulated - for active scheme members under the age of 25 and of only one year for those over the age of 25.
Dealing with the calculation of dormant rights should be calculated, the amended text refers to "national law and practice" for the calculation of pension rights values, rather than to "actuarial standards" to avoid confusion.
Generally, bystanders are reluctant to come up with detailed critiques of the new draft. But for the European Association of Paritarian Institutions of Social Protection (AEIO), Sibylle Reichert, permanent representative, expresses opposition concerning pay-as-you-go schemes, where rights cannot be ear-marked to the individual. The association is against the reimbursement of capital item, because it would threaten fund's financial stability.
At the time of going to press, Business-Europe, formerly UNICE, the main employers' federation, has to fall back on a previous position paper. However this includes the crucial point, that in most cases such supplementary pension are set up voluntarily by employers.
For the European Federation for Retirement Provision, secretary general Chris Verhaegen, does make an initial comment. She says that the amended directive appears to be setting a standard for European countries that already have in place a code for supplementary pensions.
Timing to implementation into national law in the EU will depend on results from the Council of Ministers working group, taking place around now, and parliamentary considerations in November. Overall, an optimistic target could be within two years, say 2010. But objections from Germany could result in further delay.