Brussels tables rules to ease pension transfers
LUCIA KUBOSOVA
20.10.2005 @ 17:38 CET
EUOBSERVER / BRUSSELS - The European Commission has tabled legislation aimed at making work pensions easier to transfer between jobs.
The commission says the new rules - adopted on Thursday (20 October), would boost workers' mobility from one job to another, but also across member states' borders.
The proposal covers pension schemes based on employer/employee relations - so-called supplementary/occupational benefits, or "second pillar" schemes.
As Europe’s population continues to age, these types of pensions are rapidly becoming more important than the state schemes, already protected by EU law.
Concrete changes
The new directive deals with three groups of obstacles to pensions' portability: conditions to obtain pension-related rights, their preservation, plus a possibility for workers to shift from one pension scheme to another.
It states that in countries where workers need to reach a certain age to acquire pension rights, this age cannot exceed 21 years.
The waiting period before a new worker can enter a pension scheme may not be longer than one year, and the period for those included in pension schemes to acquire some rights may not be longer than two years.
When changing jobs, workers should have the choice to maintain their rights in the former scheme – with the exception of very small rights, or transfer them.
On the way to tax harmonisation?
Portability of pension rights legislation has been discussed for 15 years and is likely to spark opposition from some quarters, as it involves different national pension systems.
However, Brussels argues that the proposal cannot be viewed as harmonisation through the back door, as it just focuses on tackling the most obvious areas where Europe's citizens have come across obstacles.
Also, it stresses that taxation of pension benefits is not dealt with in the blueprint, but some experts suggest taxation is directly linked to it.
Jorg Mortensen, an expert from the Centre for European Policy Studies, a Brussels-based think tank, argues that workers moving from one country to another encounter problems such as how to get deduction from income received in one country for pension contributions in the other.
Also, different tax systems create difficulties in working out which rules should be used for taxing pension benefits for workers that have moved across several EU states.
"These issues are very tricky, as they reflect conflict between the freedom of movement and national competences in tax legislation", said Mr Mortensen.
"Basically, only a fully harmonised system would be the complex solution to this problem, but it is unlikely to happen for the moment. Another partial solution would be more transparency and cooperation among the national tax authorities", he added.