Since its formation in 1981 the European Federation for Retirement Provision has undergone dramatic structural changes, whilst remaining faithful to the aims set out at its first gathering in Paris in September of that year.
Originally established under a brief constitution, the stated purpose of the organisation was to “represent the interest of members in negotiations with the EEC Commission and other European bodies”. It was also to provide information, carry out research and disseminate discussion papers on all activities considered necessary for the promotion of the pension movement in Europe.
The fact that the members were described as “the National Association for Retirement Provision or, where no such body exists, the recognised equivalent body” gave an early clue that pension provision in Europe is diverse indeed. Due to cultural and economic reasons there are different methods of financing occupational pensions across Europe, and in some states more than one method is found. Back in 1981 the founder member associations were mainly familiar with segregated funding methods, but even at this early stage the federation was keen to promote all methods of provision of second pillar pensions, and indeed campaigned for the removal of restrictions which inhibited such funding.
Looking back it may seem that the organisation was little more than a talking shop, but it was a talking shop which helped develop an understanding of pension provision in Europe, and ensured that expertise was developed in this most specialised of areas. From being an organisation barely known within the corridors of the EU institutions, the EFRP has become the source to which the Commission and the European Parliament now turn for authoritative statistics and informed opinion.
It was inevitable originally that three countries would dominate the organisation. The UK, Ireland and The Netherlands were responsible for the majority of the assets that funded occupational pensions across Europe. In the early days current and potential members, as well as some elements of the Brussels bureaucracy, viewed this with some suspicion. It was clear then that the EFRP would have to widen membership, and more importantly provide a genuinely European leadership. A glance at the list of eminent chairmen over the past two decades confirms that this was achieved from an early stage of the organisation’s development.
Although the federation concerns itself with the technicalities of efficient pension provision, the ultimate consumer is very much at the forefront of its policy and strategy. Securing the welfare of all pensioners in the EU and European Economic Area (EEA) is a stated aim of the organisation; the important caveat attached to this is that such provision should not jeopardise the competitiveness of European industry.
This seemingly straightforward statement has, over the years, brought the organisation into direct conflict with the Commission. Although no politician or civil servant could reasonably argue with the aim, it soon became clear to EFRP members that there was little knowledge of the pension industry among the policy and decision-makers in Brussels. Whilst the federation supported the idea that first and second pillar provision should form the basis of pension provision, it initially ran into two problems.
The first was the crisis in first pillar funding which a number of states were experiencing. This was due to an ageing population increasingly becoming dependent on a shrinking workforce funding the pay-as-you-go systems that are common in European state provision. This meant that governments were prone to look to occupational pensions to take up the slack. That is to say they saw second pillar provision as the solution to their problems. The federation was quick to point out that although such provision was indeed part of the solution, it was not the whole answer to the problem. Nonetheless, it remains the case that where first pillar provision is less generous among the member states, the greater the interest in, and take up of, second pillar pensions becomes.
The second issue that the organisation raised was the existence of barriers to the provision of efficient occupational pensions. Although the states were keen to see the industry help alleviate the difficulties that they faced, they seemed unaware of the problems which restrictions on asset class, and taxation anomalies were presenting to the pension providers.
Right at the beginning of the 1980s then chairman Maurice Oldfield said that the organisation would be judged not on how it responded to EU papers, but rather on how many initiatives it introduced.
Nevertheless, constructive engagement with Brussels had to be encouraged. To achieve this the EFRP tried to bring a wider view to the table gathered from the industry in countries across Europe, and results suggest they began successfully. A number of directives were dropped, and the Commission began to understand that pensions were an important part of the social reforms they were aiming to introduce. Freedom of movement of labour was an important part of these reforms, and was enshrined in the Treaty of Rome, however, what happened to those workers pensions was apparently not.
The EFRP used its unique position, not only to influence the Commission directly, but also acted behind the scenes, enabling member associations to provide their own governments with important information in order that they too could adopt a parallel position where possible. Again the widening of the membership played a key role in garnering support. The fact that little was coming out of Brussels which directly affected retirement provision in those early years, meant that the federation was able to put down roots, and disseminate information about the diverse provision in member states. The national associations thus learned more about one another, and how second pillar provision worked in different states.
The development of knowledge, expertise and the identification of potential problems which still tax us today would prove to be vital, when toward the end of the decade the EU began to take a greater interest in pensions.
The first real watershed was the Third Life Directive. In 1987 the Commission suggested that there was little or no difference between pension funds and insurance companies when it came to pension provision, and that consequently the directive should also apply to them. Led by their chairman Jos Verlinden the EFRP embarked on a series of high-profile meetings with the Commission to lobby vigorously against this initiative, which many members suspected had been in influenced by the powerful insurance lobby. Here was the first real test of how far the organisation had come, not only were they tackling the Commission but also a vested interest lobby.
The results of these meetings were more than satisfactory. The Commission not only retreated from its original position, but there were the first indications that it was beginning to grasp the complexity of the pensions debate. A number of issues were raised at these meetings including currency matching, the position of company sponsors as consumers of services, taxation and cross border investment.
A closer reading of the above will suggest that the EFRP had a major influence on one of the most important speeches made by a Commissioner, that of Sir Leon Brittan. In it he famously called for the “three freedoms”: freedom of cross-border pension fund management, freedom of cross-border investment, and freedom of cross-border membership of pension funds. At a stroke the Commissioner had put pension provision at the head of the agenda, and the EFRP could rightly feel that it had played its part.
There was to be a pensions directive, which was opposed in part by the organisation which was to collapse, but perhaps the most significant development around this time was the manner in which the EFRP was able to prove its lobbying credentials behind the scenes in the Barber case, which was being considered by the European Court of Justice.
By now Brussels-based consultant Koen de Ryck was acting as permanent representative in Brussels, on a part-time basis. Consequently the EFRP had developed a well-established channel of communication with the Commission. Its lobbying activities increased, and it published a number of reports on the social and economic impact of pension funds. The traffic was not all one way, however, and now the Commission was calling upon the EFRP to enter into bi-lateral discussions on the “three freedoms”, as it was preparing a consultative document. Sir Leon endorsed this closer relationship between DGXV and the federation in a letter to the then chairman.
It was not only the Commission that the organisation was developing contacts with. It had always been policy to encourage members to lobby their national governments, and now they were advised to talk more with their MEPs. At the same time links with the European Economic and Social Committee were also being established. All this has meant a reverse flow of information and policy. As already stated the EFRP is seen by the Commission as an authoritative source, and many of its objectives have spread via the EU institutions into member states, and now form the focus debate among governments which face increasing demographic pressures. During recent years we have seen major reforms undertaken in some of the more sceptical countries such as Germany, and also new legislation in some of the most threatened states such as Italy. Also, we have seen major reforms put in place in some of the more sceptical countries such as Germany, and also new legislation in some of the most threatened states such as Italy.
As the federation continued to expand during the 1990s, there was an increasing workload placed upon both the representatives themselves, and de Ryck. More and more initiatives were being undertaken, and the EU institutions were also demanding responses to their own papers. At one meeting in Vienna 1995 a number of representatives also pointed out that flow of information was also vital to the development of pensions in their own countries.
Consequently six months later it was decided to advertise the post of full-time permanent representative. It was thought that the most appropriate location for the new office was Brussels, where the lobbying activity took place. Although the new post-holder would have to complement whoever was current chairman, there would also be a need to develop the EFRPs lobbying and information services.
By April 1997 Chris Verhaegen was established in the new position, and six months later another significant change was announced when the consultation process began to set up a legal entity in Belgium, a process which was to take several years. The new articles of association re-affirm the original purpose of the organisation stating it will “stimulate the research, analysis and promotion of pension institutions as financing mechanisms for supplementary pensions in the EU and the EEA and in other countries or territories that the board of directors might deem to be appropriate”.
Under Verhaegen’s leadership the new office has managed to encourage the growth of the organisation, an expansion of its work, and also kept members informed often, via the newsletters produced by the Brussels-based centre.
This widening of the organisation seems inevitable, as the number of observers attending meetings increases. In particular Eastern and Central European countries are keen to become involved. In many of these countries funded pension provision is seen as the only way forward. Inevitably attention will focus on the EU’s own debate on expansion, and whether we should see a ‘widening’ or a ‘deepening’ of the institutions. States are already lining up on either side of the divide.
This is an example of the power struggle raging in Europe between the supporters of social policy initiatives and those aimed at benefits and pan-European pensions. The EU clearly has high ambitions in the social policy area, but there are serious economic consequences that stem from this. The issue of enlargement of the union will clearly generate even more debate. As the EFRP follows its own expansion programme it will again be an important source of information for Brussels, and for voting member states.
In the meantime issues such as the prudential framework – another EFRP initiative – and taxation of pan-European pensions will continue to stretch the resources and initiative of the organisation, which celebrates its 20th anniversary. Doubtless it will rise to the challenges, whilst carrying out the aims set out by the organisation in its former guise.