Brussels, 21/02/2003 (Agence Europe) - Mid March, in second reading, the European Parliament will be taking a stance on the pension fund directive on the basis of the report by Austrian Christian Democrat Othmar Karas, that has just been adopted by the Committee on Economic Affairs (24 votes to 3 and 13 abstentions). It introduces 23 amendments to the common position adopted on 5 November by the Council. Two points could lead to conciliation procedure with the Council, if they are adopted by the plenary: 1) the obligation that pension funds should propose to their affiliated members the possibility of an invalidity pension and a survivor pension when this risk is not already covered by the public retirement system (coverage of "bio-metric" risks however long one lives and whatever handicap); 2) guarantee of lifelong retirement security even if it is paid all in one go.
Although the Council had approved a large part of the EP first reading amendments, it had already refused these two possibilities as it felt that, by introducing the provision of lifelong financial protection in the definition of "retirement pensions", the directive could interfere with the organisation of the national retirement systems. Also, with the support of the European Commission, it had limited the coverage of "bio-metric risks". Within the Council, as at the EP plenary, the British could oppose these amendments supported by most Socialists and by the Austrians. According to the Commission, the directive must not cover products offered by the pension funds.
The Karas report also introduces an amendment that adds to the list of information to be provided for the control authorities arrangements linked to the transfer of rights between pension funds (when the worker changes company, for example). Another amendment specifies that the pension funds must be recorded on a national register with the control authorities. The funds should also each year provide their members with a report on their financial situation and the number of individual affiliate members.
Proposed in October 2000 by the Commission, the draft directive harmonises the financial safety rules for the management of the "professional retirement institutions" in order to allow the development of retirement funds through capitalisation while ensuring retirement security. It will above all allow companies established in several Member States to join a single pension fund, and the pension funds to offer their services throughout the single market. The aim is to encourage the emergence of a European pension fund market able to face competition from American funds.
The directive specifies above all that a pension fund cannot invest more than 30% of its investment in currency and 70% in quoted shares and securities, placing emphasis on "trustee securities". Neither can a pension fund invest more than 5% of its assets in the securities of its affiliated company. These prudential rules are a compromise between the positions of France, Italy and Belgium in particular, which urged for strict quantitative rules to be established, and the United Kingdom and the Netherlands, which wanted a less strict qualitative approach. Belgium also abstained, refusing to subscribe to the common position, because it considered that the quantitative rules were not sufficiently cautious.
We recall that the pension funds currently drain the sum of EUR 2,300 billion, covering 25% of the European population, especially in the United Kingdom, the Netherlands and Ireland, where they are well established. The Commission considers this could amount to 3,500 billion in 2005.