Fear of the unknown may damage the Commission’s cause in pensions

7 Apr 2014

On 27 March, the European Commission published its proposals to revise the rules for occupational pension funds, the so-called (IORP) Directive. The proposals provide updated rules on pension schemes across the EU. President of CESI´s Social Affairs Committee, Maria Geada Seoane, comments on how crucial it is for workers to be informed on these lastest developments.

Fear of the unknown may damage the Commission’s cause in pensions

The increase in the average life expectancy and ageing of the European population, combined with the drop in working population represent enormous changes to the foundations of Europe’s systems of social protection. New demographic trends are putting unsustainable pressure on these systems.  This will only worsen in the decades to come.

The situation has led many EU countries to begin adjusting their pension schemes. The gradual increase in retirement age and the indexation of pension payments to the average life expectancy are among such changes. The negative impact on the pensions paid to future retirees is clear. Pensions will be lower. Now more than ever, it is necessary to make more savings to complement retirees’ incomes, to ensure that pensions will always be adequate, secure and sustainable.  

In this context, the occupational retirement provisions, the so-called second pillar of pensions, is gaining greater importance. The proposed amendments to the IORP Directive should in general be welcomed.

However, CESI had already stated in its opinion to the Commission´s 2012 White Paper that tougher European standards may put national models at risk. These national models, which have proven they provide efficient and well-used complementary pension schemes, help to confront demographic challenges and the needs for additional retirement-provisions. 

Those aspects of the revised Directive which aim at keeping contributors and beneficiaries better informed need to be highlighted. In order to prevent a new European regulatory framework having a negative impact on well-functioning national occupational pensions schemes, further work must done to avoid any possible deterrence of legislators, employers and employees to continue making proper use of the second pillar of pension systems.

Basic requirements and improving rules which aimed at protecting members and beneficiaries of occupational pension funds and to obliging people to invest their assets prudently should of course be welcomed.

Any “improvement” of the IORP Directive should not put entire systems at risk and lead to their collapse. We cannot forget: occupational pension schemes are granted by employers on a voluntary basis. Demands which are too high should not scare them off.

This would be absurd in view of the common objective to increase occupational pension security for all. The Commission’s intentions are honourable through and through: it wants to protect insured individuals – but the result risks being exactly the opposite. A disproportionate hike in costs for contributors to the pension plans may make these crucial savings for retirement unattractive for both workers and employers.

Further informing workers and employers about the aims is key. European-level information on pension rights is an important and positive move.

The revised Directive from the Commission aims at improving both the use and supervision of second pillar pensions schemes, at helping these funds to invest in long-term financial assets and at eliminating barriers to the provision of cross-border services.

Let me emphasise the honourable objectives here. Only if concerns are cleared out will they be achieved. Only through being fully informed can a positive difference be made.

Maria Geada Seoane is President of CESI’s Employment and Social Affairs Committee