09 May 2006

IPE: UK consultants see pension directive problem

More than half of UK pension consultants see a problem with the implementation of the European pension fund directive, according to the Society of Pension Consultants. The SPC recently conducted an online poll of members, which it says highlighted “a worrying trend for EU legislation to have counter productive effects in the UK”.

Members were asked if implementation of the Occupational Pension Schemes (Cross Border Activities) Regulations 2005 had caused significant disruption to their clients’ business.

The regulations are part of the UK’s implementation of the directive on Institutions for Occupational Retirement Provision agreed in 2003.

The SPC said that 52% indicated that implementation had caused significant disruption.

“This result adds to our concern that measures designed to strengthen EU-wide pension provision will in practice have the opposite effect in the UK,” said Roger Mattingly, chairman of the society’s public relations committee.

“The EU directive is meant to be a liberalising measure but these regulations have actually disrupted clients’ business in the majority of cases.”

He added: “Unfortunately, this is not a one-off.” He pointed to Section 255 of the Pensions Act 2004, which he said puts into question the practice of offering membership of an occupational pension scheme for death in service benefits only.

“We also have a draft EU directive on portability of pension benefits, but which also has clauses governing minimum ages for scheme membership,” Mattingly said.

“These could interfere with the UK practice of operating feeder schemes to cover the period before eligibility for membership of a company’s main occupational scheme.

“One way of keeping defined benefit schemes open is to increase the age of eligibility to join, but to cover the preceding period by a feeder scheme. As currently drafted we think that the directive calls this approach into question.”
By Daniel Brooksbank

© IPE International Publishers Ltd.