Call for shake-up of EU officials’ pensions

Date: 20/04/2000

By Simon Taylor

THE UK, Germany and Denmark are calling for an increase in the amount which EU officials contribute towards their pensions to meet the rising cost of payments.

As more staff in the Union's institutions reach retirement age, governments are facing a bill for €14 billion to cover pension costs over the next 25 years and the trio argue that employees' contributions must rise by 1% to cover some of this cost.

A paper prepared by the Danish government calls for a "higher degree of self-financing of the pension system", adding: "The present remuneration level is too high in comparison with the level in the member states."

Governments are basing their demands on an analysis of the state of the Union's pension scheme by international accountancy firm KPMG which found that, on a cash basis, "the total implied contribution rate of 24.75% of salaries is clearly insufficient for maintaining equilibrium between pension payments and contributions".

One third of the cost of the Union's pension scheme is met by staff contributions and the rest by direct budgetary transfers from member states. The report warns that because the scheme is not properly funded, the deficit could rise even further in the next few years because of external factors such as interest rate movements. A fall of 1.5% in the interest rates would add more than €2 billion to the cost of the scheme, while a 1% rise would save a similar amount.

EU governments are pressing Commission Vice-President Neil Kinnock to present his ideas for reforming the system in June, as promised. He is, however, expected to argue once again that decisions on officials' pay and benefits should be postponed for two years to avoid a damaging row with the staff unions at a crucial stage in the overall reform process.

Commission officials argue that the €14-billion bill facing member states results from the rising age profile of EU staff, which means pension costs can no longer be met solely from the money staff pay in. "Until the 1990s, contributions sufficed to meet all payments. We should not confuse the discussion on the legacy of the past with what we need to do for the future", said one.

Last week, the Commission published a study into officials' pay and benefits by independent consultants which found that civil servants in the EU institutions earn less than their counterparts in multinational companies and member states' national representations.

The study found that an unmarried top A-grade EU official earns €120,000 net a year, compared with the €142,000 paid to the UK's ambassador to the Union and directors at the European Investment Bank. But national civil servants earn less, with Danish officials paid only 44% of the salary of their Union counterparts.

The UK, Germany and Denmark are calling for an increase in the amount which EU officials contribute towards their pensions to meet the rising cost of payments. As more staff in the Union's institutions reach retirement age, governments are facing a bill for €14 billion to cover pension costs over the next 25 years and the trio argue that employees' contributions must rise by 1% to cover some of this cost.