Less than 30% of Irish people covered by a workplace pension scheme
Brian Hayes, Fine Gael MEP for Dublin recently published legislative proposals on an EU workplace pension Directive (IORP Directive) which will be examined in the European Parliament tomorrow (Tuesday September 15th). His proposals address Europe’s pension time bomb that is fast coming down the tracks. Brian Hayes is the lead negotiator of this Directive.
“We have a demographic crisis in Europe which we all must face up to. Europe has an ageing population which means that funding pension provision into the future is going to become increasingly difficult. In Germany, it is projected that over 30% 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 a current level of 600,000 to around 1.5 million; an increase of 150%.
“Occupational pensions are part of the pension landscape. Every day in Ireland people put aside income to make adequate provision for their pension cover into the future. 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. This file matters to Ireland and other countries which have a large number of occupational pensions, namely the UK, Netherlands and Germany.
“The original workplace pensions Directive was adopted in 2003. This new Directive, proposed by the Commission in March 2014, gives us an opportunity to modernise and consolidate the European workplace pension landscape.
“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. This legislation should be about making it easier for people to avail of a workplace pension, it should not represent a bureaucratic nightmare for pension schemes. I’m determined that there will be no additional cost to pension schemes and pensioners following the enactment of this legislation. More Europe should not mean more cost.”
“In my legislative proposal, I have prioritised five areas of reform:
1. Cross-border activity
2. Information provided to members and beneficiaries
3. Sharing best practice between Member States
4. Applying EU standards to domestic pension systems
5. Solvency II Requirements
6. Respecting individual Member States’ pension systems
- Cross-border Activity
“As the EU workforce becomes more mobile, pension schemes need to be able to operate in a number of different Member States. Multinationals want cross-border occupational pensions as a means of concentrating their activity to one location. Cross-border activity helps the emergency of a single market for pensions. Since 2003 when cross-border was possible, the take has been very limited – only 84 in total. I’ve proposed new cross-border pension schemes should be fully funded at the moment of their establishment. At the moment they are required to be fully funded at all times. This is clearly a barrier to the single market for pensions.
- Information provided to members and beneficiaries
“One of the most critical areas in pension legislation is making sure that scheme members and beneficiaries are well-informed of their rights and benefits. I have proposed legislative reforms which would ensure that all workplace pensions provide key information to scheme members and beneficiaries.
- Sharing best practice between Member States
“Pension provision varies widely across the EU. Member States with established pension systems such as the Netherlands, should work with newer Member States in sharing best practice and independent regulation. In the context of this Directive, I have proposed that a High Level Working Group be formed where Member States can share best practice about improving supplementary pension provision.
- Applying EU standards to domestic pension systems
“I’ve 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. This change effectively gets rid of the major disparity between cross-border and domestic workplace pensions.
- Solvency II requirements
“I’ve recognised the unique character of workplace pensions across Europe. My proposals define for the first time the characteristic of a workplace pension in respect of social and financial obligations. Pensions are not insurance products. Therefore, I have not applied the existing Solvency II requirements for additional capital to this Directive. Applying Solvency II would mean more cost schemes and less return to pensioners.
- Respecting individual Member States’ pension systems
“The EU has limited competence in the area of pension provision and we should ensure that Member States are free to decide their own pension policy. I have ensured that this Directive is a principles-based piece of legislation and does not have a ‘one-size-fits-all’ approach.
“We have to encourage more people to take up supplementary pensions through EU and national government initiatives. Relying on state pensions into the future is becoming more and more precarious. If we are to avert a pension time bomb in Ireland, we need to boost the coverage of private pensions.”