03 March 2005

EIS: New Portability Directive could face “vital” opposition

The forthcoming directive on transferability of pension rights may face some crucial objections from certain member states, social affairs Commissioner Spidla said in an interview with Europe Information on February 28. The Commissioner insisted that allowing workers to transfer their pension rights between member states is fundamental to achieving free movement of labour.

“The indications are that there will be relatively few oppositions or objections but that these may be quite vital,” said Mr Spidla, adding that the Commission consulted widely about the proposed directive, but that “it is likely to be in the detail that we will encounter problems.”

As an example of an obstacle that will need to be surmounted, the Commissioner referred to the difference in the value of the currency or purchasing power between member states. This might make transferring the exact same pension entitlements between countries more problematic, said Mr Spidla.

The Commissioner said he was aware of member states worries about the new directive cutting across their traditional pension systems. “We will have to figure out or develop a system which would be based on some reasonable concept that wouldn't be too heavy-handed,” said the Commissioner. He also stressed that the new directive should not undermine the willingness of employers to contribute to their pension schemes.

The European Federation for Retirement Provision (EFRP) is not convinced by the Commissioner's promises, however. “To avoid the risk that employers would abandon the provision of occupational pensions because of increasing complexity and costs, EFRP suggests considering a legislative pause,” said Chris Verhaegen, the organisation's secretary general. Also, the EFRP called for a large degree of subsidiarity in order not to disrupt systems that currently operate satisfactorily.

Mr Spidla suggested that, in the future, private occupational pension schemes could account for as much as 30% of retirement provision, compared to around 10% at the moment. “This means that, if the pensions portability directive is not introduced, then transferability will be three times as difficult as it is today,” he said.

The Commission plans to come out with its proposal for a new directive on portability of pensions in the next few months. Before that the Commission will issue a green paper - provisionally for March 16 - on its approach to demographic aging over the next few years, particularly as it relates to pensions and migration policy.

© EIS