Commission consults on supplementary pensions

In June 2002, as part of its drive to increase freedom of movement within the European Union, the European Commission launched the first stage of consultations with the EU-level social partners on the transferability of supplementary pension provision.

The European Commission has been focusing on various aspects of pension provision for some time, as part of its attempts to encourage freedom of movement within the European Union. Thus, on 12 June 2002, it launched the first stage of an EU-level social partner consultation exercise on the subject of the portability of supplementary pension provision.

The Commission notes in its consultation paper that there is currently no common framework in the EU which regulates the transference of company pension rights. Currently, if employees switch employers, they may have a guaranteed entitlement to a pension with the new employer only if they have fulfilled certain conditions, such as a minimum age for scheme membership, waiting periods for membership and vesting periods.

The Commission also notes that the transfer of funds accrued in pension schemes can be difficult, both between schemes in the same country and between schemes in different Member States. In the latter case, transfers are not always possible and, even if they are, they can be subject to high levels of taxation. The Commission takes the view that this severely restricts the mobility of EU workers wishing to move between Member States or change jobs within their own Member State. It notes that only 16.4% of workers in the EU had been with their employer less than one year in 2000, compared with 30% of workers in the USA.

The Commission therefore asks the social partners for their views on: the need for EU action on the portability of supplementary pension rights; the form that such action should take; the main features of the action; whether it should be at cross-sectoral and/or sectoral level; and the possible material scope of the action. It focuses on three main topics:

• rules on acquisition and preservation of pension rights;

• rules on transferability of pension rights; and

• rules on cross-border membership of pension schemes – remaining in the same pension scheme while moving to a job in another Member State.

The Employment and Social Affairs Commissioner, Anna Diamantopoulou, stated: 'The loss of pension rights hampers workers' right to free movement around the EU and is an obstacle to labour mobility and the creation of jobs. Only an EU-wide solution can address this problem, which is a serious headache for a growing number of workers in the EU. Agreements such as the recent political consensus allowing EU-wide pension funds are important but they tend to mask the serious problems which individual workers will still face when they are forced to change from one company pension scheme to another, even within their own Member State. We must therefore consider carefully what must be done about the conditions of acquisition, preservation and transferability of supplementary pension rights throughout the EU. Excessively lengthy qualifying periods for supplementary pension rights imply reduced pension rights for mobile workers and discrimination against women who are more likely than men to take career breaks for family reasons. Pension architecture of this kind is no longer acceptable on grounds of equity and is incompatible with the increased need for mobility in today's labour market.'

This consultation exercise is based on Article 138 of the Treaty establishing the European Community. Once the Commission has heard the views of the social partners, it will decide whether Community-wide action is advisable. If it does, it will consult the social partners once more on the possible content of a proposal.