Improving the Portability of Supplementary Pension Rights

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Notes

1. With some exemptions of supplementary pensions that operate on a pay‐as‐you‐go system, where the contributions of current workers are used to pay for the existing pensioners.

2. The Commission had previously expressed its intention to present a proposal on the portability of supplementary pension; see for example COM (2002) 72 final, “Commission's Action Plan for skills and mobility”. In this Communication the Commission announced its decision to consult with the social partners.

3. See (SEC (91) 1332 final) on ‘supplementary social security schemes: the role of occupational pension schemes in the social protection of workers and their implications for freedom of movement’; Council Recommendation 92/441/EEC on the convergence of social protection objectives and policies; COM (97) 283 final ‘Supplementary pensions in the Single Market’ and COM (99) 134 ‘Towards a Single Market for Supplementary Pensions’ and COM (2001) 214 ‘Elimination of tax obstacles to the cross‐border provision of occupational pensions’; and in various documents since Lisbon, (see for example, Social Policy Agenda COM (2000) 379, Action Plan for Skills and Mobility (COM (2002) 72), and Social Agenda COM (2005) 33).

4. This Directive aims to ensure equal treatment between workers who move to another Member State and workers who remain within the same Member State but for whom contributions are no longer being made into the scheme, with regards to the preservation of supplementary pension rights. Furthermore, supplementary pension schemes will have to make payments in other Member States of all benefits due to workers, net of any taxes and transaction charges that may be applicable. Finally, in relation to posted workers, contributions can continue to be made to the supplementary pension scheme in the workers' Member State of origin. Directive 2003/41 (O.J. 2003, L235, pp 10–21) on the activities and supervision of institutions for occupational retirement provision, may also facilitate labour mobility since it allows for the set‐up of pan‐European pension funds by multinational companies.

5. In some cases occupational pension schemes (like in France the AGIRC and ARRCO that operate on a pay‐as‐you‐go basis) are also covered by Regulation 1408/71.

6. This has provoked criticism. See the response of the ETUC (European Trade Union Confederation), which had participated in the consultation of the social partners that states that ‘once again the market is taking priority over the social side’, available at www.etuc.org published at 24/10/05. It also comments that this proposal establishes some common principles (not rights), which are however given some merit. UNICE (Union of Industrial and Employers' Confederations of Europe) supported the aim of facilitating the cross‐border labour mobility within the EU, but believes that the positive impact of this proposal is uncertain since the tax obstacles have not addressed. UNICE is also concerned that this proposal could lead to an increase of cost of operating supplementary pension systems” (UNICE@News, December 2005).

7. In many countries transfers are already possible but the costs and taxation systems in many cases result in considerable losses for the pension entitlements.

8. Case 238/82, Duphar, [1984] ECR 523, para. 16; Cases C‐159 and C‐160/91, Poucet and Pistre, [1993] ECR I‐637, para. 6; Case C‐70/95, Sodemare, [1997] ECR I‐3395, para. 27; Case C‐120/95, Decker, [1998] ECR I‐1831, para. 21; Case C‐158/96, Kohll, [1998] ECR I‐1931, para.17; Case C‐157/99, Geraets‐Smits and Peerbooms, [2001] ECR I‐05473, para. 44.

9. Case C‐120/95, Decker, para. 23; Case C‐158/96, Kohll, para. 19; Case C‐157/99, Geraets‐Smits and Peerbooms, [2001] ECR I‐05473, para. 44.

10. Joint report of the Social Protection Committee and the Economic Policy Committee on objectives and working methods in the area of pensions: applying the open method of coordination (adopted in November 2001).

11. See for example Case C‐118/96 Safir v Skattemyndigheten I Dalarnas Lan [1998] ECR I‐1897; Case C‐136/00 Rolf Dieter Danner [2002] ECR I‐8147; Case C‐422/01 Forsakringsaktiebolaget Skandia and Ola Ramstedt v Riksskatteverket [2003] I‐6817.

12. For example the low birth rates that will result in less active workers and more pensioners.

13. Article 137, does not envisage the adoption of ‘hard‐law’ measures, as are the Directives, in relation to the modernisation of social protection systems. Article 137, 2 (a), can be applied only in the fields (a) to (i) mentioned in 137, 1, excluding the adoption of directives for point (k): the modernisation of social protection systems.

14. This was the aim of the Commission's attempt for a proposal for a directive in 1995, that was however not submitted and the issue was referred to a High Level Panel on Free Movement of Persons, chaired by Mrs Simone Veil (Tamburri, 2005). This directive aimed at the safeguarding of supplementary pension rights only of cross‐border mobile workers.

15. I would like to thank Professor Tamara Hervey and Professor Jeffrey Kenner for their helpful comments on a first draft of this note. All mistakes are my own.