MEPs’ EUR44m pension gap

By David Cronin

Date: 22/12/05

A European Parliament voluntary pension scheme has opened up a projected deficit of 44 million euro despite demanding increased contributions from Parliament funds and from MEPs' salaries.

The scheme has assets of 145m euro, but an assessment by an independent actuary reported that to cover pensions and other obligations at the end of 2004 the fund needed reserves of 189m euro.

The figures have just been presented to MEPs at December's annual meeting of the pension fund. Despite making a return on investments of 7.5% during 2004, the funding gap increased from 42m euro in 2003.

The gap between assets and projected liabilities began opening up in 2001. In 2002, a decision was taken to increase the amount paid into the fund. The contribution rate was raised to 39% of a reference salary, one-third of which is contributed by the MEP and two-thirds by the Parliament.

An MEP who chooses to join the scheme currently pays in 948.13 euro per month. The scheme was criticised in November 2003 by the European Court of Auditors, which argued that the Parliament lacked a sound legal basis for its contributions to the scheme.

The court also warned at that time that clear rules should be established to define the liabilities and responsibilities of the Parliament in the event of a deficit.

The annual report of the directors, who are mostly MEPs, recommended this year that the contributions to the fund should be increased again, this time to 45% of the reference salary, still with Parliament contributing two-thirds. The bureau, composed of the president and the 14 vice-presidents, had yet to approve this increase at the time of the annual report.

The fund's actuaries advised the directors that for at least the next ten years the fund would receive more in new contributions and investment income than is paid out in pensions. But they still recommended other reforms which were not taken up.

A recommendation to change the retirement age was shelved after June's agreement on a common salary for MEPs of all nationalities - the MEP's statute.

The new statute will see the introduction of a new pension scheme.

The directors of the existing voluntary pens-ion fund are urging Parliament to fund new pension arrangements under the statute and also to continue with the exist- ing scheme.

"We believe that both the existing voluntary pension scheme and the new statute pension scheme whilst separate can and should be run under one pension fund umbrella," says the report.