By Chris Jones - 19th June 2007
STRASBOURG: MEPs have backed significantly watered-down plans to simplify the rules on supplementary pension rights.
The European parliament backed the proposals from Dutch centre-right MEP Ria Oomen-Ruijten that set minimum age standards for acquiring pension rights and strengthened the rules on so-called dormant rights.
But some MEPs complained that the proposals were watered down too much as a result of opposition from member states, and that they would not address the key issue of transferring pension rights from job-to-job and country-to-country.
The original proposal from the European commission set 21 as the minimum age for acquiring pension rights – an age increased to 25 in the parliament report.
But Oomen-Ruijten said that the commission’s proposals also included a loophole that would allow countries where the age limit is higher – such as Germany, where it is set at 30 – to continue to do so.
“We wanted to strike a balance, setting the minimum age at 25. But member states are free to negotiate earlier ages with the social partners in their country if they want,” she said.
The report also sought to ensure that rights acquired by workers in pension schemes were protected even after they had left a particular job – and that those rights develop in the same way as active rights held by current employees.
This means that they cannot be frozen at the level set at the time the employee left the company but must increase in line with inflation and other factors.
Only British and Irish supplementary pension schemes currently come with this guarantee.
The report also allows member states to opt for a lump sum payment for employees leaving the company rather than preserving their rights.
Parliament also introduced proposals to reduce so-called ‘vesting’ periods - the time in which an employee pays into a scheme before acquiring rights to the pension - to a maximum of five years and remove them altogether for workers over 25.
Contributions made by workers under 25 must be completely reimbursed if they leave the company before the end of the vesting period, the report stipulates.
But parliament was more cautious when it came to the transfer of rights from company to company, despite the commission’s original proposal that this should be included in the rules.
Such transfers are not possible in many EU countries, while cross-border transfers of rights are extremely rare indeed, with issues such as taxation making them too complicated.
So rather than back plans to force member states to allow the transfer of active rights from company to company, Oomen-Ruitjen suggested that national governments should simply try to make this easier in the future – and called on the commission to draw up proposals to this effect within five years of the new rules coming into force.
Despite the watering down of the text, employment commissioner Vladimír Špidla welcomed parliament’s report.
“The commission had made a much more ambitious proposal which would have enabled workers to enjoy true portability of their pensions,” he said.
“I still believe that parliament’s report is a real step in the right direction. Today’s report will greatly contribute to ensuring mobile workers face fewer barriers and that supplementary provision will continue to be successful and sustainable.”
Speaking to journalists in Strasbourg, Špidla acknowledged the progress made, underlining that “achieving the right balance between reducing obstacles to mobility, while maintaining a stable and sustainable environment for the development of supplementary provision is one of Europe's greatest challenges”.
“Enabling workers to move freely around the EU and national labour markets without losing important work pension benefits is a clear example of flexicurity in action. Mobility must not be punished but rewarded.”
But Green MEP Jean Lambert complained that taking out the proposals to allow the transfer of acquired rights between companies had made a mockery of the text.
“People should not have their contributions to pensions left like drying pieces of salami when they move jobs,” she said.
“This directive will not help if it means that people end up with 10 mini-pensions from 10 different employers over the course of their working lives.”
But employers were more cautious in their response to parliament’s vote.
EuroCommerce, the group that represents the retail and wholesale trade in the EU, said that some of the provisions in parliament’s text would prove too costly for business.
These include making the new rules apply retroactively to existing contracts – a proposal that remains vague in the final text agreed by parliament – which the group claims would “effectively punish companies that have provided generous company pensions in the past”.
The elimination of vesting periods for workers over 25 was also criticised, as EuroCommerce said it would mean a substantial increase in cost and bureaucracy due to many more small supplementary pension accounts to be administered.
“Such a fundamental change of the national systems is neither needed, nor justified in order to achieve cross-border mobility,” the organisation said.
Small businesses were also disappointed with the report.
“The unworkable and unrealistic clauses it brings about will discourage small businesses from offering supplementary pension schemes to their employees, making it increasingly difficult for SMEs to attract the skilled workforce they need,” said Hans-Werner Müller, secretary general of small business union UEAPME.
Have your say...
Please enter your comments below.