Opinion of the Economic and Social Committee on the 'Proposal for a Council Directive on safeguarding the supplementary pension rights of employed and self-employed persons moving within the European Union'
Date: 1998-03-25
Institutions: European Economic and Social Committee
Subjects: EU Member State, free movement of persons, pension scheme, self-employment, wage earner

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the example of similar initiatives by the European
Parliament on electricity from renewables;

threshold, inter alia in order to encourage the granting
of EU and national financing for certified business plans;

use EU and national financial instruments —
8.5.9.
and soft loans in particular — to encourage and facilitate
investment in new CHP plant, promoting a gradual but
precise programme to decommission or modernize
obsolete plant;

8.5.10.
adopt a common methodology for quality
certification and validation of projects for new CHP
plants and/or, where practically and economically feasi-
ble, for the modernization of existing plants, according
to common criteria regarding a minimum efficiency

consider making CHP plants eligible for the
8.5.11.
future ‘efficiency credits’ related to greenhouse gas
emissions, being examined by the UN in the wake of the
Kyoto decisions;

8.5.12.
ensure that the key actions of the fifth frame-
work programme, and particularly those concerning the
city of tomorrow, advanced energy systems and water
treatment, give adequate consideration to new CHP
technologies, especially for small, flexible, decentral-
izable plants.

Brussels, 25 March 1998.

The President

of the Economic and Social Committee

Tom JENKINS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Directive on
safeguarding the supplementary pension rights of employed and self-employed persons
moving within the European Union’ (1)

(98/C 157/07)

On 15 January 1998 the Council decided to consult the Economic and Social Committee,
under Article 235 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Social, Family, Educational and Cultural Affairs, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 12 February 1998. The
rapporteur was Mr Whitworth.

At its 353rd plenary session of 25 and 26 March 1998 (meeting of 25 March 1998) the Economic
and Social Committee adopted the following opinion by 98 votes to four, with five abstentions.

1.

Introduction

From the earliest days of the European Com-
1.1.
to
munity the Commission has sought, pursuant
Article 51 of the Treaty, to bring forward measures in
the field of social security to provide freedom of
movement for workers and in particular to ensure that
persons moving jobs from one Member State to another
do not sustain any loss of benefits in this field.

1.2.
Regulation 1408/71 on the application of social
security schemes to employed persons, self-employed

(1) OJ C 5, 9.1.1998, p. 4.

persons and their families moving within the Community
sought inter alia to remove obstacles to cross-border
mobility in the field of statutory pensions. The regulation
which is a complex one has been frequently amended
but has achieved its objective in this particular field.

1.3.
The pursuit of a similar objective in the area of
occupational pensions has proved much more difficult.
This is undoubtedly because of the extreme diversity
of such arrangements and the laws and regulations
governing them in the various Member States. Never-

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theless the solution of this problem is an essential
pre-requisite for the completion of the Single Labour
is
Market, and the Commission’s present proposal
timely, if not long overdue.

Article 8: Provision of information. Adequate infor-
mation as to their rights and choices to be provided to
members when moving abroad.

1.4.
In 1991 the Commission published a consultation
paper entitled ‘Supplementary Social Security Schemes:
the Role of Occupational Pensions Schemes in the
Social Protection of Workers and their Implications for
Freedom of Movement’ (1).
In its opinion on this
document the Economic and Social Committee high-
lighted a number of points regarding the possible
coordination of occupational pensions schemes and the
corresponding acquisition and exercise of rights and
transfer options across the Community, and urged the
Commission to take action in this respect (2).

2. The Commission proposal

2.1.
The stated aim of the proposed directive is to
ensure that appropriate protection is given to rights
acquired, or in the course of acquisition, by members of
supplementary pension schemes who move from one
Member State to another.

The directive seeks to achieve this aim by the

2.2.
following provisions:

Article 4: Preservation of vested pension rights. A
member in respect of whom contributions to an occu-
pational pension scheme are no longer being made on
his leaving an employment to work in another Member
State should not lose the rights already acquired under
that scheme.

Article 5: Guarantee of cross-border payments. Full
payment of benefits to be made to members resident in
another Member State.

Article 6: Posted employees. Members temporarily
posted by their employer to work in another Member
State to be allowed to continue to contribute to their
home scheme on the same basis as that applicable under
Regulation 1408/71 to statutory schemes (i.e. for one
year extendible to two).

Article 7: Tax treatment. Such contributions to be
treated by the host state as if being made to a domestic
scheme.

(1) SEC(91) 1332 final.
(2) OJ C 223, 31.8.1992, p. 13.

3. General comments

3.1.
The Economic and Social Committee welcomes
the proposed directive as a limited first step towards the
objective of complete freedom of movement in the field
of supplementary pensions. It recognizes the complexity
of the matter occasioned by widely differing pension
arrangements in the 15 Member States as well as the
laws, regulations and tax conditions which govern
them. The Committee acknowledges that certain of the
directive’s provisions are already applicable in various
of the Member States but not in others.

3.2.
The preservation of vested pension rights
required by Article 4 of the draft directive is an example
of that situation. However the principle that persons
moving to another Member State should be in no worse
or no better situation than those remaining within the
same Member State is a correct one and should be
enshrined in EU legislation.

3.3.
Similarly the payment of benefits in other Mem-
ber States is already the norm. Regulation 1408/71
already requires this for statutory benefits and it is right
that Article 1 should apply the same principle to
supplementary benefits.

3.4.
The Committee considers that the provision in
Article 6 that contributions can continue to be made to
their home scheme by temporarily posted workers
and/or their employers on their behalf is the most
valuable feature of the draft directive. It will greatly
benefit employees of multinational companies who may
in the course of their careers undertake a number of
such postings and it will materially assist their employers
to provide occupational pensions for them without
incurring additional costs and complex administrative
arrangements.

3.4.1. However the Committee believes that the one
year period applicable under Regulation 1408/71 is far
too short and that the provision should be applicable
for the full period of the posting. It notes that Recommen-
dation 16 of 22 December 1984 recommends that the
twelve-month period should be extended with the
agreement of the employer for the full duration of the
assignment when employees move abroad within an
organization because of special knowledge or skills
or to meet specific objectives. It believes that this
recommendation should be given legal effect within
both Regulation 1408/71 and the current draft directive.

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3.4.2.
Article 6.2 will be helpful to employees posted
to certain Member States (and their employers) in that
they will be absolved from any legal requirement to pay
contributions to a supplementary scheme in the host
state if they are continuing contributions in their home
state.

of information to members of supplementary pension
schemes moving to another Member State. It believes
that the employer, as well as the manager of the scheme,
should be obliged to provide the individual with full
information as to the available options and the conse-
quences of choice.

3.4.3.
It should be noted that the term ‘posted worker’
in Article 3(g) is defined by reference to Title II of
Regulation 1408/71 as follows: — ‘A person employed
in the territory of a Member State by an undertaking to
which he is normally attached who is posted by that
undertaking to the territory of another Member State to
perform work there for that undertaking ...’ Hence the
term excludes persons seconded by their employer to
another Member State to perform work there for a
different undertaking. The Committee believes that
there should be no distinction between these two
categories.

3.5.
Article 7 follows logically from Article 6. It is
particularly significant as a first attempt to cut through
the jungle of the differing tax treatment of supplementary
pension contributions and benefits in the various Mem-
ber States. However anomalies will still obtain; for
example, in certain circumstances, an employee posted
from the UK to Germany would not receive a tax
deduction for his contributions which he would have at
home, but when he returned to the UK the benefits for
his German service would be taxable which they would
not have been had he been in a German plan. In the
reverse direction a posting from Germany to the UK
could result in tax deductible employee contributions
and tax free benefits on receipt. The Commission should
encourage Member States to be flexible in establishing
a satisfactory approach between each other to resolve
such anomalies.

3.5.1.
It is noted that the provisions of Article 7 are
applicable only to members of supplementary pensions
schemes as defined in Article 3(b) and not to individuals
who have made their own pension provision through
personal pension schemes. There is a case for such
arrangements being regarded as supplementary pension
schemes, particularly in those Member States where
employers contribute to them on a voluntary or contrac-
tual basis.

The Committee attaches particular importance
3.6.
to the requirement in Article 8 regarding the provision

3.7.
As already noted the draft directive creates
inequality of treatment between posted and seconded
workers (Article 6) and in the field of taxation between
members of occupational schemes and individuals with
personal schemes (Article 7). These distinctions should
be eradicated by further measures as soon as possible.

4. Specific comments

4.1. Second recital

It should be noted that occupational pension schemes
(which are the subject of this draft directive) are quite
separate and distinct from the supplementary social
security schemes which obtain in certain Member States;
as such they do not form part of national social security
regimes
in those countries. Occupational pension
schemes are contractual in nature and form part of
an employee’s contract of employment. It would be
desirable for an additional recital to refer to the role of
occupational pension schemes in this context.

4.2. Article 3(a)

It is noted that the insertion of the term ‘replace’ is
necessary to cover the position in certain Member States
where contracting-out provisions apply.

4.3. Article 3(b)

‘Or’ should be substituted for ‘and’ in the first line as
‘occupational pension schemes’ and ‘collective arrange-
ments serving the same aim’ are alternatives.

4.4. Article 3(h)

The definition of ‘Member State of origin’ is defective
in relation to any second or subsequent posting. In such
circumstances it should be that in which the employee
worked immediately prior to the initial posting.

4.5. Article 4

It is noted that the term ‘full’ preservation includes, for
in
example,

to index benefits

requirement

the

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defined-benefit schemes where this obtains under the
rules of the scheme — as stated in part 3.1 of the
Commission’s Impact Assessment Form.

suggestion in paragraph 5.5 of that opinion as to how
this matter might be progressed and considers that this
should be done within a defined time frame.

5. Further recommendations

5.1.
As noted in point 3.1 above the Committee
regards the proposed directive as a limited first step
towards the objective of complete freedom of movement
in the field of supplementary pensions. Reference has
already been made in point 1.4 to the fact that the
Committee identified a number of areas for action in its
1992 Opinion on the Role of Occupational Pension
Schemes and their Implications for Freedom of Move-
ment.

In its Opinion of 11 December 1997 (1) on the
5.2.
Commission’s Green Paper on Supplementary Pensions
in the Single Market, the Committee made a number of
recommendations concerning issues identified by the
Commission but not dealt with in the current draft
directive. These included:

— qualifying conditions for acquiring rights; in particu-
lar the long periods necessary in some Member
States;

— difficulties with transferability of vested pension

rights from one Member State to another;

— tax difficulties linked to acquiring pension rights in
more than one Member State; the position of a
worker temporarily employed in another Member
State other than on a posted basis.

5.3.
The opinion also contained a number of specific
recommendations on the importance of taxation for
supplementary pensions.

5.4.
The Committee repeats the observations and
recommendations contained in its December 1997 opin-
ion. There are a number of further aspects of the
operation of occupational pensions schemes which could
usefully be addressed — for example the membership
of trustee bodies, custodial arrangements and calculation
of transfer values. It urges the Commission to devise
and propose a series of further measures in these areas
in order to achieve as an ultimate objective, where the
nature of the schemes so permit, the complete portability
of occupational and personal pensions which it regards
ingredient in the free movement of
as an essential
persons throughout the EU. It draws attention to the

5.5.
The Committee recalls that in its 1992 opinion it
suggested the possibility of devising a model European
Company Occupational Pension Scheme, (perhaps as
an appendage to the European Company Statute once
this has been finally adopted), and that the possibility
of
industry-based schemes might be
looked at. It repeats these suggestions as a possible way
forward without seeking to harmonize existing national
pensions laws, regulations, practices and taxation
arrangements (2).

trans-national

5.6.
Another possibility might be an arrangement
whereby an occupational pension scheme established
under the laws and regulations of one Member State
could have a number of sections to which employees
working in other Member States might belong on a
tax-qualifying basis. Thus the operation of the scheme
including its prudential and custodial controls, solvency
requirements and investment regulations would be
regulated by the laws and regulations and accord with
the practices of the home Member State, while the tax
arrangements for contributions and benefits would
accord with those of the host Member States for
employees domiciled therein.

5.7.
This would mean that a free market could
operate in supplementary pensions schemes similar to
that for life assurance without prejudicing the autonomy
of Member States as regards taxation, social security
arrangements and laws governing the operation of
pension funds.

6. Conclusions

The Committee welcomes the draft Directive as
6.1.
a limited first step towards applying the principle of
the free movement of persons to the mechanics of
supplementary pension rights. It feels that the draft
Directive should be amended to extend the one-year
period for posted workers (paragraph 3.4.1 on the
opinion), to remove the anomalies noted in paragraph
3.7 and to reflect its Specific Comments in part 4.

6.2.
It recognizes the very great difficulties which
inhibit progress in this area due to the widely differing
pension arrangements which obtain in the various
Member States as well as the laws, regulations and tax

(1) OJ C 73, 9.3.1998, p. 109.

(2) The European Company Statute was the subject of a recent
opinion from the Committee in December 1997 and a
further opinion will be forthcoming in due course.

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arrangements which govern them.

the Commission to
it urges
6.3. Nevertheless
continue its work in this field, taking steps in particular

Brussels, 25 March 1998.

the

issues

to address
identified in its Opinion
of December 1997 on the Commission’s Green Paper
as well as the further recommendations contained in
part 5 of this opinion.

The President

of the Economic and Social Committee

Tom JENKINS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) amending Regulation (EEC) No 1408/71 as regards its extension to nationals of third
countries’(1)

(98/C 157/08)

On 6 January 1998 the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Social, Family, Educational and Cultural Affairs, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 12 March 1998. The
rapporteur was Mr Liverani.

At its 353rd plenary session (meeting of 25 March 1998), the Economic and Social Committee
adopted the following opinion by 109 votes to one, with four abstentions.

1.

Introduction

2. General comments

1.1.
The Commission proposal, which is based on
Articles 51 and 235 of the EC Treaty, extends Community
coordination of social security schemes, as laid down
by Regulation (EEC) No 1408/71, to employed persons
and self-employed persons who are insured in a Member
State and who are not Community nationals.

2.1.
The Committee welcomes the Commission pro-
posal. It endorses its rationale, and the recitals con-
firming the objective of equal social treatment of third
country nationals, as already underscored in the 1994
white paper on social policy and the 1995-1997 medium-
term social action programme.

1.2.
The proposal is designed to strengthen Regu-
lation (EEC) No 1408/71, and forms part of the drive to
step up social protection and improve the legal status of
third country nationals legally resident in the Com-
munity.

2.2. Here the Committee would reiterate the guide-
lines put forward in its opinions on the status of migrant
workers from third countries (2). It also notes that the
importance of applying the principles of non-dis-

(1) OJ C 6, 10.1.1998, p. 15.

(2) Opinions of 24 April 1991 (OJ C 159, 17.6.1991) and

26 September 1991 (OJ C 339, 31.12.1991).