15 May 2013

Mark Cobley: The EU is both saint and sinner on pensions reform

If the EU were trying to antagonise the UK's business and finance elites, not to mention its citizenry, then its proposals to double pensions liabilities by treating them as if they were insurance companies, encouraging them into low-growth, low-risk government bonds, look like a good way to do it.

But Europe is also capable of positive steps. One arrived this week, when a consortium of six European pension funds and agencies announced that, at the European Commission's request, they are coming together to work on a pan-EU data registry. The six are the three Dutch pension funds APG, PGGM and MN, plus the insurer Syntrus Achmea, which between them have around 12 million pension savers; PKA from Denmark, which looks after the savings of 255,000 Danes; and ETK of Finland, a government agency that advises pension plans with 2.4 million Finns as members. This group has been given the job of making it easier for European citizens to track their pensions savings across borders, if they switch jobs between countries.

The six partners are working on the tracking system project for the next 18 months or thereabouts, a PGGM spokesman said, and will report back to the Commission on its ultimate feasibility by the “end of 2014, or beginning of 2015”. The Commission has previously found that the idea of a tracking service, based on existing national systems, was "widely supported" in its industry consultations.

All this is in marked contrast to its other main policy. The EU authorities are also partway through a revision of its existing pensions law, the Institutions for Occupational Retirement Provision, or IORP, Directive. They want to develop a single EU-wide set of rules for making sure pension schemes are adequately funded, and base these on already-controversial insurance regulation, called Solvency II.

Yesterday, the pan-European lobby group, PensionsEurope – which vehemently opposes this idea – said the EU's latest impact study "cannot serve as a basis for an IORP II Directive". The lobby group said that the "large number of assumptions", the "uncertainties linked to a complete new supervisory mechanism" and the "different methodologies used to make very complex calculations" mean that this kind of EU harmonisation is all but impossible.

The contrast between the solvency proposals, and the cross-border data-tracing service, are almost a microcosm of the two very different visions of Europe that are doing battle in the wider economic and political debate. While the rush to cram diverse systems into a single mould is increasingly unpopular and very probably doomed to failure, the idea of making those diverse systems work better together is surely the way forward for Europe, in pensions as in much else.

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