Explanatory Memorandum to COM(2005)507 - Improving the portability of supplementary pension rights - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2005)507 - Improving the portability of supplementary pension rights. |
|---|---|
| source | COM(2005)507  |
| date | 20-10-2005 |
1)
Contents
- Context of the proposal
- Legal elements of the proposal
- 2)Consultation of interested parties and impact assessment
- Consultation methods, main sectors targeted and general profile of respondents
- Summary of responses and how they have been taken into account
- 4)Budgetary impact
- 5)Additional information
- Objective (Article 1)
- Scope (Article 2)
- Definitions (Article 3)
- Conditions governing acquisition (Article 4)
- Preservation of dormant pension rights (Article 5)
- Transferability (Article 6)
- Implementation (Article 9)
·Grounds for and objectives of the proposal
The revised Lisbon strategy 1 and the Social Agenda 2 stress how important mobility is to improving the adaptability of workers and the business sector and increasing labour market flexibility. Considering the increasing importance of supplementary pension schemes to cover the risks of old age, it is thus particularly important to reduce the obstacles to mobility which stem from these schemes. The Commission states in its Lisbon action plan its intention to submit legislative proposals in this area.
This proposal is accordingly designed to simultaneously reduce the obstacles to freedom of movement across Member States and to mobility within any Member State stemming from provisions contained in these supplementary pension schemes. These obstacles relate to: the conditions of acquisition of pension rights, the conditions of preservation of dormant pension rights, the transferability of acquired rights. The proposal also seeks to improve the information given to workers on how mobility may affect supplementary pension rights.
·General background
The social protection systems in the different Member States have to address the problem of demographic ageing. The reforms adopted or envisaged in most Member States are moving towards further development of supplementary pension schemes, something which is moreover actively encouraged by certain Member States.
It is thus urgent to ensure that the rules governing the operation of these schemes do not hamper the mobility of workers and reduce the opportunities for mobile workers to build up sufficient pension rights by the end of their careers; otherwise the flexibility and effectiveness of the labour market would be reduced. Even if there are many factors which can determine the choice of any person to change jobs, it is clear that the fact that any such person could stand to lose a substantial part of his supplementary pension rights may make that person seriously think again about wanting to change jobs.
This proposal is the culminating point of several years of exchanges at European level on the need and how best to improve the operation of these supplementary pension schemes in order to facilitate worker mobility.
·Existing provisions in the area of the proposal
The lack of a common regulatory framework on the portability of supplementary pension rights remains an obstacle to the freedom of movement of workers and to occupational mobility in general, including within the Member States themselves.
A first step with a view to reducing these obstacles was taken through Directive 1998/49/EC 3 , which seeks inter alia to guarantee the right to equal treatment for people moving from one country to another.
·Consistency with other policies and objectives of the Union
The recent Commission Communication to the 2005 Spring Council 4 and the integrated guidelines 5 stress the substantial importance of policies to improve the responsiveness of the labour markets by fostering occupational and geographic mobility. The policy plan on legal migration which the Commission will adopt by the end of 2005 also will take initiatives in this respect.
·Consultation of the stakeholders
The Commission has consulted the social partners on two occasions, the first time on the case for and the means of Community action on the portability of occupational pension rights 6 . The social partners were generally in favour of Community action on this. The Commission therefore began a second phase of consultation of the European social partners 7 on the possible substance of any Community action along these lines. It emerged from this consultation that the social partners had divergent views on the thrust of the action and on the instruments. They did not therefore start any negotiations with a view to an autonomous agreement.
Since its inception in 2001, the committee in the area of supplementary pensions 8 (hereinafter referred to as the Pensions Forum) has been closely involved in examining the obstacles to mobility stemming from the rules governing supplementary pension schemes. The Pensions Forum comprises representatives of the Member States, of the social partners and of the pension funds and other organisations active in this area.
The reactions of the members of the Pensions Forum, including those of the Member States and the social partners, have been incorporated into the impact assessment which accompanies this proposal.
·Collection and use of expertise
It has not been necessary to call in outside expertise.
·Impact assessment
Even though this proposal is not formally written into the Commission’s working programme and need not therefore be the subject of an impact assessment, the Commission nonetheless feels that in the interests of better lawmaking and more transparency the different options in terms of measures which could be taken in this area and their impact in terms of costs and benefits should be examined.
3)
·Summary of the proposed action
This proposal establishes common principles for improving the exercise of the right to freedom of movement, one of the fundamental freedoms of the European Union, and the operation of the internal market, principles which fit in with the adjustments of the supplementary pension schemes already under way in the Member States.
Worker mobility both at national level and from one Member State to another is an essential factor in a smoothly-functioning European employment market and is an integral part of the ambition set out in the Lisbon strategy to strengthen employment and economic growth. There is therefore a need to improve not only this mobility from one Member State to another but also occupational mobility within any country. Certain of the rules governing supplementary pension schemes, particularly those relating to acquisition of pension rights, hamper this internal mobility. This stifles the development of companies from other Member States because of the problems of recruiting qualified personnel (this personnel being held back in their companies by the rules governing supplementary pension schemes). This Directive accordingly seeks to bring the laws of the Member States in this area closer together in order to improve the conditions of competition on the European employment market.
·Legal basis
The proposed legal bases are Articles 42 and 94 of the EC Treaty. Article 42 was already used as the legal basis for Directive 1998/49/EC. Article 94 of the EC Treaty is appropriate in that a genuine improvement in the portability of supplementary pension rights cannot be achieved unless there is an improvement in occupational mobility in general, including within Member States. Furthermore, better general occupational mobility is essential to allow smooth operation of a common market using a flexible labour force unimpeded by the implementation of certain supplementary pension scheme rules, such as those whereby a worker sometimes has to stay with the same employer for a substantial period of time before acquiring rights.
·The principle of subsidiarity
The principle of subsidiarity applies in so far as the proposal does not affect an area covered by the exclusive competence of the Community.
The objectives of the proposal cannot be sufficiently be achieved by the Member States for the following reasons.
Employment markets do not end at the borders of the Member States, so a Community-level measure needs to be taken in order to make these markets more flexible and more effective by removing certain obstacles to the mobility of the labour force which stem from these occupational pension schemes.
The objectives of the proposal can be better achieved by Community action for the following reasons.
The guidelines and recommendations formulated on several occasions over the past ten years by the European institutions have not brought about a significant approximation of the national laws; indeed, there is a risk that divergences could increase in a European Union of 25 countries.
The current and future context of the development of European-scale pension systems makes it necessary to adopt a Community instrument today: on the one hand, the EU has since 2003 had a legal framework which favours the cross-border management of supplementary pension schemes; on the other, as shown in the recent study conducted by the Social Protection Committee in conjunction with the Commission on the future of occupational supplementary pension schemes, these schemes are set to grow significantly. The time has therefore come to provide a common reference framework.
The proposal therefore complies with the principle of subsidiarity,
·The principle of proportionality
The proposal complies with the principle of proportionality for the following reasons.
The choice of instrument and the practical aspects are in line with the principle of proportionality: the form opted for is that of a directive and not a regulation, this in order to respect the heterogeneous nature of the organisation of supplementary pension systems in the Member States, while establishing an overall framework setting out the objectives to be achieved by the Member States without prescribing how they are to be attained.
Lastly, the provisions proposed have been gauged according to the minimum essential requirements taking due account, thanks to the impact assessment, of the possible repercussions on existing national schemes; they also provide for a suitable time frame for transposing certain provisions contained in this Directive.
·Choice of instruments
Proposed instrument: directive.
Other means would not be appropriate for the following reasons.
A less binding instrument, such as a code of conduct, would have little chance of securing the desired result, as the discussions which have taken place for over 15 years at European level have failed to produce a voluntary initiative of this type. Furthermore, many elements on which the supplementary pension schemes are based are governed by the laws of the Member States.
A more binding instrument, such as a regulation, would not offer the flexibility needed to take due account of the vast diversity of supplementary pension schemes and the fact that they are often voluntary.
The proposal has no impact on the Community budget.
·Correlation table
The Member States are required to communicate to the Commission the text of national provisions transposing the Directive as well as a correlation table between those provisions and this Directive.
·European Economic Area
This draft instrument has to do with an area covered by the EEA Agreement and must therefore be extended to the European Economic Area.
·Detailed explanation of the proposal by chapter or by article
Article 1 lists and summarises the objectives described in paragraph 1.2.
In the interests of consistency with Directive 98/49/EC, the scope of this proposal is identical to that of the previous Directive. It thus covers all supplementary pension schemes (defined in Article 3) with the exception of the schemes covered by Council Regulation (EEC) No 1408/71 of 14 June 1971, as subsequently amended.
In view of the substantial heterogeneousness of supplementary pension schemes across the Member States, it is essential to define certain terms used in this proposal.
Paragraphs a) ("supplementary pension '), b) ('supplementary pension scheme”) and d) (“pension rights”) contain definitions which are identical to those used for the purposes of Directive 98/49/EC, in the interests of consistency with the scope of that Directive.
It should be noted that the term “portability” used in this proposal refers to the possibility for an outgoing worker to acquire and retain supplementary pension rights.
In order to attenuate the adverse effects of the conditions of acquisition of supplementary pension rights on the exercise of the right to freedom of movement, the draft Directive provides for the following elements of flexibility:
–A worker who has not yet built up any acquired rights within the supplementary pension scheme but who has already paid contributions should not lose them. Accordingly, contributions should be reimbursed or transferred in full.
–The requirement for a high minimum age is a major disincentive to the mobility of young workers if a departure before reaching this minimum age results in the loss of pension rights for the period worked before the minimum age. A worker must start acquiring supplementary pension rights at the latest as of the age of 21.
–The waiting period during which a worker cannot yet become a member of the scheme should be reduced. This period should not exceed one year (unless the minimum age has not yet been reached). The schemes thus maintain in particular the possibility of linking the waiting period to the qualifying period (which generally does not exceed one year).
–In order to allow outgoing workers to build up sufficient supplementary pension rights during their career, particularly for those who have had a succession of jobs, the possibility of applying qualifying periods, i.e. the period of membership to be completed before the worker obtains acquired rights, should be limited. This period should not exceed two years.
A mobile worker should not have to suffer a considerable reduction in the acquired rights he has left within the supplementary pension scheme under his former employment relationship. Member States have different instruments for making this adjustment, depending in particular on how the rights of active members develop.
In order to avoid excessive administrative costs stemming from the management of a high number of low-value dormant rights, the proposal provides for the option not to preserve these pension rights but to use a transfer or a payment of a capital sum representing the acquired rights when these do not exceed a threshold established by the Member State concerned.
Under the proposal for a Directive, the outgoing worker should have the choice between maintaining his rights within the supplementary scheme of his former employment relationship and the transfer of his acquired rights, unless his new job is covered by the same supplementary pension scheme or unless the scheme makes a capital payment because of the low value of the rights acquired.
An outgoing worker opting for a transfer of his rights should not be penalised by calculations of the value of the rights transferred made by the two schemes involved in the transfer, or by excessive administrative charges. Information to be supplied (Article 7)
The purpose of Article 7 is to supplement the provisions which exist at European level with regard to the information to be supplied, as set out in Directive 2003/41/EC. The scope of this Directive, which also covers schemes which do not function using the capitalisation principle, is wider than that of Directive 2003/41/EC, which means that additional provisions must be established in this area. Moreover, Directive 2003/41/EC makes provision only for the information to be supplied to members and beneficiaries; this scope needs to be supplemented by giving every potentially outgoing worker, irrespective of whether or not he is a member of a scheme, information on how terminating an employment relationship could affect his supplementary pension rights.
Minimum requirements – non-regression (Article 8)
In line with the spirit of the implementation of the internal market and the social provisions relating thereto, the proposal for a Directive does not preclude any more advanced provisions on portability which Member States might take; it likewise rules out any initiative which would be tantamount to regression in relation to the existing degree of portability.
Considering the diversity of supplementary pension schemes across the Member States, this proposal for a Directive adopts a flexible approach in order to implement certain provisions linked to the conditions governing the acquisition of pension rights and transfer. Member States can thus have more time to transpose certain provisions which might be too binding in the short term.
Considering the extent to which the social partners are involved in the organisation and management of supplementary occupational pension schemes, the proposal for a Directive allows for the option for Member States to entrust its implementation to them.