Hopes rise for pensions deal by summer

Date: 30/04/1998

By Tim Jones

THE UK presidency is almost certain to clinch a deal to protect the private pension rights of people who move from one EU member state to another, before the end of its term at the Union's helm.

Optimism has been fuelled by an agreement among key MEPs to support the proposal with only one minor amendment, clearing the way for EU governments to approve the new law within two months.

A report by Austrian Socialist Euro MP Harald Ettl which recommends adoption of the draft directive safeguarding the pension rights of workers temporarily posted abroad has already won the backing of the two largest political groups and was set to be endorsed by the full Parliament at its plenary session in Brussels today (30 April).

Supporters of the proposal believe it is an essential first step towards full pension portability in the EU and will encourage workers to seek jobs in booming regions outside their country's borders rather than remaining in stagnant local economies.

Such mobility will become vital after the launch of economic and monetary union in January if mass unemployment is to be avoided - a threat foreseen in the European Commission's consultative Green Paper on fundamental pensions reform.

"This may be only a first step, but it was absolutely necessary to do it," said Ettl. "In the background, there is the Green Paper and that has to be turned into a White Paper as soon as possible. If you want real freedom for workers, you must have a supplementary pensions system that works efficiently."

His amendment calls for member states to review their national regulations periodically to assess their "cross-border impact in relation to social security and taxation".

The British government, which holds the EU presidency until the end of June, is keen to push the reform and British Employment Minister David Blunkett hopes the directive will be adopted by social affairs ministers at their next meeting on 4 June in Luxembourg.

The measure, which must be approved by all member states, allows people working temporarily in another EU country to continue contributing to a private pension fund in their home state.

The UK's National Association of Pension Funds (NAPF) sees the proposal as a step towards a single market in retirement finance in which its members would be well-placed to win significant market share in other EU countries.

However, industry experts expect a clause allowing workers to be eligible for any tax relief on private pension contributions offered by their host nation to be dropped in order to secure a deal in June.

"This directive is only half a step in the right direction," said Bill Birmingham, head of research at the NAPF. "If you don't get equal tax treatment for your pension contributions, what's left isn't that much of an advantage."