Thursday

26th Jan 2023

EU taxpayers risk bailing out MEP pension scheme

  • Farage (l) was listed, among many other British MEPs, of being part of the European pension fund (Photo: European Parliament)

EU taxpayers risk bailing out the European Parliament due to a €326 million actuarial deficit for an MEP pension scheme.

First set up in 1990 and open to MEPs until 2009, the voluntary pension fund risks bleeding large amounts of cash from the parliament's budget given, in part, a sharp increase in the number of people reaching an early retirement age.

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"Already after five years there was a deficit up to €9 million, which was not normal," Belgian Green MEP Bart Staes told EUobserver on Monday (19 February).

Such losses are indirectly paid by the EU taxpayer because the European parliament budget is the fund's financial lifeline. MEPs stopped contributions in 2009. Up until then, for every €1,000 paid into the scheme, the EU parliament contributed €2,000.

That money was then invested by the Luxembourg-based non-profit known as the Pension Fund of the Members of the European Parliament. With no money coming, more MEPs going into retirement, and a tricky stock market portfolio, the fund risks going bust in six years.

The investments also appear to be dubious with Staes noting money has gone into things like the arms industry and in nuclear energy.

"It is not the fair or ethical investments that you could think that a pension fund linked to the European Parliament would take into account," he said.

The pension fund was legally set up by the parliament's bureau, an internal parliamentary body composed of the president and vice-presidents but is largely considered the brainchild of former British MEP and conservative politician Richard Balfe.

Balfe was also a 'questor' at the European parliament, tasked among other things, with overlooking the financial and administrative interests of MEPs. He is now the fund's chairman and maintains it has earned some €127 million between 1994 and 2014.

The fund was also launched because many French and Italian MEPs had no proper pension scheme at the time. Balfe and other conservative and labour MEPs then pressed to create a fund for everyone. MEPs were only required to pay into the scheme for two years to qualify for the life long pension.

Money woes

But the European Parliament is liable to underwrite the scheme and must guarantee those payments. It means the parliament will be forced to pay by finding money elsewhere in its budget should the fund become insolvent.

A parliament spokesperson noted MEP contributions into the fund stopped from 2009 onwards, piling on further pressure.

She said that a so-called discount rate, described as an indicator of economic growth which is used in the forecast of future pension payments, has gone down significantly over the past few years.

Other factors include age. People in the scheme can start receiving benefits as of 63, increased from 60 in 2009, but still far below the age of other national pension funds.

The Luxembourg based non-profit had resisted the age increase at the time and even took the matter to the European Court of Justice, which it lost.

Who is on it?

EUobserver has also seen documents that list the names of people signed up on the fund from between 2003 and 2008. Some of those on the list may have since dropped out given the controversial nature of the fund.

British MEPs, including eurosceptic Nigel Farage, seem to dominate. Former French MEPs Marine Le Pen and her father Jean-Marie are also listed.

Others include the current president of the European Parliament Antonio Tajani as well as two European commissioners and the prime minister of Malta, Joseph Muscat - all former MEPs.

As of May 2015, the scheme counted 1,007 members of which 721 former MEPs or their surviving dependents were receiving retirement benefits. Another 145 extra MEPs will be receiving monthly payments from the fund in 2022 given that every year a new set of people under the scheme reach the retirement age.

It means annual payments will rise from the around €16 million in 2016 to an average of over €20 million for the next few years.

Staes is demanding the extra 145 MEPs to step out of the fund and possibly have the money they paid into it returned.

"They know the life expectancy of people and the actuarial deficit is linked to the life expectancy," he said.

Dubious contributions

It also appears that some MEPs at the time siphoned off their contributions to the fund from their monthly general expenditure allowance.

The allowance is a tax free lump sum of €4,342 given to each MEP every month, deposited into their personal bank accounts. The money is supposed to be used to cover costs like renting an office, hosting conferences, or paying for magazine subscriptions. There is no oversight on how the money is used.

Staes says MEPs used part of the money, which is EU taxpayer money, to also fund their pension schemes.

"All members paid that one-third [€1,000] out of their general allowance expenditures, which cannot be considered as an income," he said.

What next?

The issue will likely be discussed on Tuesday (20 February) at the European Parliament's budgetary control committee. British socialist Derek Vaughan will be presenting the European Parliament's draft discharge report.

Staes says he and other MEPs like Dutch liberal Gerben-Jan Gerbrandy will be tabling amendments to the report, should it fail to tackle the pension fund.

The budget committee vote is set for end of March, followed by a plenary vote in April.

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