05 February 2008

IPE: "Portability not main aim of pension promise"

The European Commission is “too much focused” on full portability of pension rights and has forgotten occupational pensions are a bonus which companies offer employees to stay with the firm, according to Austrian economics professor Ulrich Runggaldier.

Speaking at a conference in Vienna last week, Runggaldier suggested in a large number of European countries second pillar pension arrangements are still not mandatory, but are offered by employers on a voluntary basis in their race for well-qualified employees.

“There is nothing evil in a boss trying to bind an employee to their company using pension benefits,” Runggaldier noted at a symposium on occupational pensions in Vienna, organised by the university for economy WU Wien.

He explained under the current proposed European Commission directive by the EU on portability - now known as the mobile workers' pensions rights directive - employees would acquire the vesting rights to an occupational pension already after less than five years of working for an employer.

“I think the EU commission believes the fewer years it takes to acquire pension rights the more mobile workers will become,” Runggaldier noted.

He added implementing this regulation in Austria will be “an interesting challenge” as the current legislation only grants pension rights after a five-year-period.

However, he noted all attempts by the commission to create an environment in which full portability of pension rights is possible “have failed” and said the latest amended proposal issued last year “is not suitable to provide full portability”.

Runggaldier added the paragraph on indexation of pension assets left in a company by an ex-employee is seen critical by many countries as this might mean exploding costs for employers.

In contrast, the Slovenian EU presidency announced at the end of January it was “determined to pursue the adoption of the Directive on the portability of supplementary pension rights”.

“The Council has successfully resolved most of the outstanding questions. All we need is a modicum of political will to take the final decisive step,” said Slovenian minister for labour, family and social affairs, Marjeta Cotman.

© IPE International Publishers Ltd.