Employment committee agrees on minimum standards for supplementary pension rights

The new directive aims to remove "the obstacles created by certain provisions on supplementary pension schemes" in order to improve the freedom of movement across Member States as well as within any Member State. According to the first-reading report by Ria Oomen-Ruijten (EPP-ED, NL), the directive shall apply to all schemes that offer supplementary pensions for workers, e.g. group insurance contracts, pay-as-you-go schemes agreed by one or more branches or sectors, funded schemes or pension promises backed by book reserves. However, the new conditions shall not refer to schemes that have stopped accepting new active members. The directive should be adopted by all Member States no later than 1 July 2008.

 

 

MEPs sought to establish common minimum standards for acquiring supplementary pension rights. For example, they set a maximum "vesting" period of five years i.e. after at most five years in job employees will have acquired rights that have to be paid or preserved after the termination of their employment. Moreover, no vesting conditions shall be applied to members of a scheme once they have reached the age of 25. If the employee has not yet acquired vested pension rights when the employment is terminated, all the contributions paid, or their investment value if the worker bears the risk, should be reimbursed.

 

 

The committee calls on Member States to take measures to ensure that outgoing workers can retain their vested pension rights in the scheme in which they have acquired them. Member States shall also guarantee "fair treatment" of the value of those dormant pension rights, says the text. The value of dormant rights should, therefore, generally develop in line with that of the rights of active members. MEPs underline that the values of dormant rights should be adjusted in accordance with, for example, inflation rates, salary levels, current pensions or the return on investment intended by the supplementary pension provider.

 

Yet Member States may also allow supplementary pension schemes to pay a capital sum to former employees instead of preserving their rights. This sum should be equivalent to the value of the vested pension rights and should be paid to the worker as long as it does not exceed the threshold established by the Member State.

 

 

Employment committee members took a more cautious approach to the transferability of pension rights and spoke against the Commission's proposal to include this right into the new directive. The Commission proposed that workers should be able to transfer their vested rights to the new employer. Nevertheless, when introducing new supplementary pension schemes, Member States should endeavour, as far as possible, to gradually improve the transferability of vested pension rights.

 

MEPs also ask the Commission to draw up a report, no later than five years after the directive takes effect, on the conditions for transferring capital representing workers' supplementary pension rights  This report should be the basis for proposing any amendments to this directive.

 

Parliament plans to put this report to a plenary vote on 24 April 2007.