Dimas sets his sights on easing EU ‘pension pot’ blockage

By Peter Chapman

Date: 20/055/04

STAVROS Dimas, the recently appointed commissioner for employment and social affairs, is about to unveil proposals to plug a small, but important gap in the EU's rulebook aimed at making it even easier for the Union's 455 million citizens to move around the 25 member states.

Under the plan, the European Commission will insist upon a minimum level of harmonization, to cut the complex mesh of legal barriers that make life difficult for workers in occupational pension schemes.

These are the pensions - sometimes mandatory but usually backed by the state through tax incentives - which citizens contribute to via their jobs.

As traditional state-provided pay-as-you-go systems become less and less generous, many citizens are relying on their occupational schemes to provide for them in their old age.

But experts from Dimas' department fear the legal system often leaves workers in the lurch if they change jobs at home or abroad, although the picture is different across the Union.

Often, employees must wait years before they are allowed to join a company scheme - called a 'vesting period'. This is a particular problem in Germany, the experts say.

If employees then move to another job, they are often unable to take their entitlements with them to their new scheme in their own country, let alone another member state.

And if these entitlements are blocked until retirement, they do not increase in line with inflation - meaning their real value is eroded over the years.

In the worst-case scenario, expatriates flitting between firms in different member states can find themselves with several frozen pension pots or no occupational pension at all.

All of this has a tendency to make workers think twice before switching jobs. This is not exactly what the EU's internal market - or, indeed, the Lisbon Agenda's bid to make Europe the world's most competitive economy - is meant to be about.

Jérôme Vignon, director of the Commission's employment and social affairs directorate-general, confirmed last month that the directive would tackle all these problems. He said the law, expected to be unveiled in the Autumn, will "seek to strike a delicate balance" between EU competencies, mobility of workers and the 'subsidiarity principle' that applies to the social and organizational aspects of pension provisions.

Subsidiarity is EU jargon for ensuring that decisions are taken at the right level - but the term is interpreted by many member states as an argument for stopping the EU legislating.

In the meantime, Vignon said the Commission is preparing an impact- assessment study of the directive and is consulting representatives and stakeholders in the pension sector.

The directive follows an abortive consultation between the Commission and so-called social partners - an essential process during which the EU executive tries to find a common agreement with stakeholders and governments before pressing ahead with legislation in this area.

UNICE, the EU employers' body, has severe doubts about Dimas' 'one-size-fits-all-approach' - although it insists it favours the mobility of workers.

UNICE's pensions expert, Lorena Ionita, told the Strasbourg meeting this could discourage employers to provide supplementary pension provisions.

Differences between the national systems and practices are so immense that the Commission should not try to harmonize vesting periods or the index mechanisms applied by each member state, she warned. Instead, Ionita said, the proposal should only deal with the cross-border aspects of the portability of pension rights.

Meanwhile, Withold Galinat, manager of the pension fund for chemicals giant BASF, a member of the European Federation of Retirement Provisions, challenged the urgency and the impact of a Commission initiative - as mobility mostly takes place in multinationals which have their own provisions.

He said that a bigger priority should be to increase the number of employees who are actually entitled to occupational pensions.

To do this, he claims it is "pivotal to simplify matters" and to ensure that occupational pensions can be provided in a cost-efficient way. Any further tough requirements for harmonizing the waiting and vesting periods - as well as indexation of entitlements - will be counterproductive and should be avoided, he warns.

Meanwhile, Jaap Maassen, director of Dutch pension fund ABP, said member states ought to tackle the myriad problems at home before the EU steps in.

He told European Voice: "What I am saying is 'for God's sake don't touch on that before we have developed a concept of national portability'."

Maassen added that a scheme was now in place in the Netherlands but had taken "many years" to set up.

Trade union groups, however, have already given their blessing to Dimas, who inherited the brief from fellow Greek Anna Diamantopoulou in March.

Of course, Dimas, 63 this year, is unlikely to need the law - even if he follows in fellow Commissioner Frits Bolkestein's footsteps and works until he is past 70.

But the EU's mobile workforce are hoping they will notice the difference when they draw their pensions.

Stavros Dimas, European Commissioner for Employment and Social Affairs, aims to introduce legislation that will make it easier for workers to move around the European Union, removing the barriers that make life difficult for workers in occupational pension schemes.

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