Union boost for ‘portable’ pensions

Date: 09/10/1997

THE European Commission has taken the first steps towards enabling workers to take up jobs in other EU countries without being penalised over their pension arrangements.

A proposal aimed at safeguarding pension payments made by employees before they move abroad won the support of the full Commission this week and is likely to be given fast approval by national governments.

Currently, employees can lose a large proportion of their rights and payments if they move to another member state. The Commission has long identified this as a major obstacle to the cross-border movement of workers and a big hurdle to the proper functioning of the single market.

Around 3 million Union citizens work in other EU countries, with half a million of them on short-term temporary postings. The Commission proposal would allow the latter group to continue paying towards pensions in their home country and claim deductions for their contributions against local tax.

Social Affairs Commissioner Pádraig Flynn insisted that governments were unlikely to lose out too much from the plan. Some countries have rendered the continuation of such payments unattractive by refusing to give tax relief for contributions to foreign funds.

But the Commission proposal does not address two key problems hampering the creation of a single European pensions market.

Temporary postings normally only run for one year, but in exceptional circumstances can be extended to two. Under the plan, those living permanently abroad would still have to sign up with a local pension fund and would not be able to continue paying into their home country schemes even if they were more favourable.

Secondly, schemes such as those in Germany which require payments to be made for up to ten years before a contributor becomes a fully recognised member entitled to claim benefits have not been tackled.

Flynn initially tried to reduce these long qualification times, but was warned off by national governments.