Out-Law / Your Daily Need-To-Know
Workers switching jobs or countries will no longer have to worry about substantial loss of work pension benefits under the 'portability of pensions' Directive, proposed by the European Commission today.
At present, changing job or country can mean losing occupational pension benefits in some Member States. But today’s proposal would mean avoiding major losses and in many cases allowing benefits to transfer with the worker across sectors and countries in the EU.
The Directive will help the growing numbers of EU workers who are switching jobs. In the original 15 Member States, one worker in three changes jobs every five years and 9% of employees change employer each year.
The Directive will support the Commission's 'Jobs and Growth' strategy by making it easier for workers to move jobs and countries. As worker flexibility increases, so do the opportunities to fit the right skills in the right parts of the labour market across the EU. The Directive comes at a time of increased focus on supplementary pensions in the EU, with many countries introducing reforms in anticipation of the effects of ageing populations.
Vladimír Špidla, European Commissioner for Employment, Social Affairs and Equal Opportunities, said: "If we expect workers to be mobile and flexible we cannot punish them if they change jobs. Pension rights must be fully transferable. This Directive has been long overdue."
This proposal is designed to reduce the obstacles to mobility within and between Member States caused by present supplementary pension schemes provisions. These obstacles relate to: the conditions of acquisition of pension rights (such as different qualifying periods before which workers acquires rights), the conditions of preservation of dormant pension rights (such as pension rights losing value over time) and the transferability of acquired rights. The proposal also seeks to improve the information given to workers on how mobility may affect supplementary pension rights.
Once signed into law, a regular review will take place to see how the Directive's provisions are working. A separate review will take place after 10 years of Member States' option to exempt book reserve schemes and support relief funds, commonly found in countries such as Germany.
This exemption option, along with the one for pay-as-you-go schemes, was introduced to avoid the possibility of transferability leading to financial difficulties for schemes or undertakings. Exemptions also allow these schemes a smoother adaptation in taking on the Directive's more flexible labour market requirements.
The Commission's proposal deals only with those pensions related to the workplace (occupational pensions) – laws allowing for the mobility of state (statutory) pensions have been in place under EU legislation for over 30 years. Nor does it deal with tax or indexation of pension issues. However, the Commission services will continue to investigate the consequences of tax legislation on the portability of supplementary pension rights.
Agreement on the wording of the proposal took some time to arrive due to the complexity and diversity of the supplementary pension provisions across the EU and the extensive consultations the Commission engaged in. These took in the opinions of the pension forum, which includes the social partners (employer and employee representatives), the Member States and pension industry figures.
