Second social partner consultation on transferability of occupational pensions

In September 2003, the European Commission launched the second phase of social partner consultation on the transferability of occupational pensions. In the consultation document, it sets out its thinking on a range of issues and states that, in its opinion, the most appropriate regulatory instrument would be a collective agreement at European level.

A first phase of social partner consultation on the transferability of occupational pensions was initiated by the European Commission on 12 June 2002 ( EU0207201N). In its first consultation paper, the Commission noted that that there is no common framework in the EU which regulates the transfer 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 therefore asked 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 the action should be at cross-sectoral and/or sectoral level; and the possible material scope of the action. The consultation document focused 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 - ie remaining in the same pension scheme while moving to a job in another Member State.

This first consultation exercise was carried out on the basis of Article 138 of the Treaty establishing the European Community ( TEC). In accordance with this procedure, once the Commission has heard the views of the social partners, it decides whether Community-wide action is advisable. If it does, it consults the social partners once more on the possible content of a proposal. At this second stage, the social partners may forward an opinion or recommendation on the content of a Commission proposal in the area concerned, or inform the Commission of their wish to begin negotiations over a European-level agreement

Social partners’ response

In response to the first stage of consultation, the view of the EU-level social partners was broadly that there is a need for action at EU level in order to improve the portability of occupational pensions. However, there were differing views on the instruments needed to address this issue.

On the employer side, the Union of Industrial and Employers’ Confederations of Europe (UNICE), the European Association of Craft and Small and Medium-sized Enterprises (UEAPME) and the Association of Hotels, Restaurants and Cafés in Europe (HOTREC) stated that any Community-wide initiative on this issue should be limited to cross-border transfers. These organisations opposed the introduction of EU legislation on the conditions of acquisition, preservation and transferability of occupational pension rights, believing that this would interfere with arrangements at national level. They also stated that an instrument at EU level could actually discourage employers from offering supplementary pensions to their employees.

However, some employers' organisations, such as the European Banking Federation (FBE), the European Federation of National Insurance Associations (CEA) and the European Construction Industry Federation (FIEC), supported the setting up of a common EU-level framework, although in the form of recommendations, guidelines or codes of best practice.

The European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) also supported EU-level action, suggesting that the social partners take action within the framework of the European social dialogue. It also thought that certain aspects of transferability could be resolved through a Directive.

On the trade union side, the European Trade Union Confederation (ETUC), the European Confederation of Executives and Managerial Staff (CEC) and the Council of European Professional and Managerial Staff (EUROCADRES) were all in favour of an EU-level regulatory framework, preferably a Community Directive. ETUC stated that the social partners could initiate negotiations for a framework agreement setting out broad principles in this area.

The second consultation

Having considered all the responses to its first consultation, the Commission issued a second consultation paper to the EU-level social partners on 15 September 2003. In this document, it sets out its thinking on a number of issues, as follows:

• action aimed at removing obstacles to pension portability should not be limited to cross-border mobility, but should cover both workers moving within a country and those moving across borders;

• the conditions for the acquisition of occupational pension rights, such as waiting and vesting periods and age requirements, should not act as a deterrent to labour mobility in the EU;

• serious consideration should be given to the preservation of 'dormant' rights so that they do not lose value;

• the largest possible number of 'job changers' should have the opting of choosing between preserving their acquired pension rights in the scheme of origin and transferring the capital value to another pension scheme, including a scheme in another Member State;

• actuarial conditions applying to transfers of accrued pension rights should be fair;

• the impact of a new Directive ( 2003/41/EC) establishing the right for pension institutions to manage pension schemes on a cross-border basis (adopted on 3 June 2003), Commission action to address discriminatory tax treatment against cross-border provision of occupational pensions and a Directive ( 98/49/EC) on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community, should all be evaluated before any further steps in the area of cross-border membership are proposed; and

• scheme members should be made fully aware of their rights, particularly in the case of job mobility.

The Commission states that it believes that there is a need and scope for legislative action fixing minimum requirements to improve the portability of occupational pension rights within the EU. It believes further, however, that the most appropriate instrument in this case is a collective agreement at European level. It justifies this view by stating that occupational pension schemes are often based on the initiatives of the social partners at branch or company level or the initiative of the employer. Therefore, it states, 'the European social partners are in a position to make a major contribution to the solution of problems linked to the portability of occupational pensions in the European Union.'

The Commission therefore invites the social partners:

1. to present an opinion or, where appropriate, a recommendation on the possible content and scope of the envisaged initiative; and

2. to inform it, where appropriate, of their resolve to open negotiations on this issue. If they do, they should also inform the Commission about whether they wish to adopt a global approach or concentrate on certain aspects of portability. They should also inform the Commission about the envisaged scope of the negotiations, ie what type of pension funds would be covered.

Commentary

The second-stage consultation on the issue of the portability of occupational pensions is highly significant. The area of occupational pensions, well developed in some EU Member States, is growing. It will arguably increase in importance in the coming years as national governments try to encourage occupational and private pension provision in order to take some of the strain off creaking state provision. Given this, and the fact that job mobility within the EU is increasing - a phenomenon which is being encouraged by the European Commission in its attempts to remove obstacles to the free movement of workers ( EU0301205F) - the issue of ensuring that workers can move their occupational pension entitlement with them, across borders if necessary, is of vital importance.

It would seem likely that EU-level social partner negotiations on this issue will be initiated at some point in the future. The Commission has made it clear that an EU-level agreement is its preferred method of regulation of this area. The unresolved question is the status of any resulting agreement and what the social partners will be willing to include in such an agreement. Employers, while stating that Community-level action is advisable, would generally nevertheless prefer non-binding instruments, while employee representative bodies appear to be more in favour of a binding and more wide-ranging instrument. (Andrea Broughton, IRS)