12 October 2005

IPE: Commission to approve Portability Directive

The European Commission is set to approve a delayed occupational pensions portability directive on October 20 - yet the document has already drawn fire from Germany’s occupational pensions lobby Aba.

The approval, which had been expected earlier this year, is the first step in the creation of an EU directive on occupational pensions portability. Once a directive materialises, EU member states will be obliged to transpose it into law.

The Directorate General for Employment and Social Affairs – the Commission body handling the directive – has so far provided no detail to the public on what it contains.

Katharina von Schnurbein, spokeswoman for the DG, told IPE the draft has to be approved by the Commission first. She added that a news conference on the directive was scheduled shortly after the approval.

However, Germany’s Aba has seen a copy of the directive in its current form and is unhappy with it. Aba claims the draft would significantly raise costs for German industry and thereby hinder the further development of the second pillar.

According to Aba, there are essentially two problems with the draft. First, the document requires companies holding pension assets as book reserves to fully capitalise accrued benefits for those who leave.

In other words, an employee leaving a company using book reserves would get their accrued benefits paid out fully in cash. As book reserves account for almost 60% of the ��bn in German occupational pension assets, Aba fears considerable costs related to the proposed requirement.

Aba also rejects a requirement in the draft whereby companies would be required to protect accrued pension benefits of employees who have left from a “substantial erosion in value”.

Von Schnurbein stressed that the Commission was actively in touch with the German pensions industry to take its views and concerns fully into account.

She noted that the Commission’s approval on October 20 was just the first step in the legislative process, adding that it would likely not be completed before the end of 2006.

The Institutions for Occupational Retirement Provision directive took some 10 years to come to fruition.

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