Reforms suggested by Irish MEP Brian Hayes to address the pensions time bomb in the EU will be examined in the European Parliament tomorrow.
Last year, the European Commission adopted a legislative proposal for new rules on occupational pension funds aimed at improving the governance and transparency of these schemes while also promoting cross-border activity, and helping long-term investment.
"As lead negotiator in the European Parliament for this directive, I have proposed legislative changes which will make occupational pensions more accessible, more equitable and safer," Mr Hayes told The Irish Times.
He cited a “demographic crisis” in Europe in terms of pension coverage that needs to be addressed. “In Germany, it is projected that more than 30 per cent of the population will be over the age of 65 by 2050. In Ireland, CSO projections indicate that over the next 30 years the number of people over the age of 65 will rise from 600,000 currently to around 1.5 million.”
“We have to encourage people to save and manage these schemes to the highest standards. Quite amazingly, over half of all European occupational pensions, albeit small schemes, are domiciled in Ireland.”
The original workplace pensions directive was adopted in 2003. This new directive, proposed by the commission in March 2014, proposes to modernise and consolidate the EU legislation.
The Fine Gael MEP is focusing on five areas of reform: cross-border activity, information provided to members and beneficiaries, sharing best practice between member states, applying EU standards to domestic pension systems, solvency requirements, and respecting individual member states’ pension systems.
Cross-border
“Multinationals want cross-border occupational pensions as a means of concentrating their activity to one location,” Mr Hayes said.
“Since 2003 when cross-border was possible, the take up has been very limited – only 84 in total. I’ve proposed that new cross-border pension schemes should be fully funded at the moment of their establishment. At the moment they have to be fully funded at all times. This is clearly a barrier to the single market for pensions.”
Mr Hayes said a “critical” area of pension legislation was making sure that scheme members were well-informed of their rights and benefits. He also believes that countries with established pension systems such as the Netherlands should work with newer member states in sharing best practice. He has also proposed as a minimum that the EU standard on fully-funded requirements and transfer of a pension scheme’s assets should apply not only to cross-border activity but to all new or additional domestic pension schemes.
There are almost 70,000 workplace pension schemes in Ireland with 420,000 members and more than €90 billion of assets under management. Mr Hayes said the take-up of such pensions could be higher as less than 30 per cent of Irish people are covered by a workplace pension scheme compared with about 90 per cent in the Netherlands.
