Gay Mitchell chairs discussion on pensions- 8 December 2010
December 8, 2010
Pensions in EU Member States- Speech by Gay Mitchell on 8th December in the European Parliament
Yesterday, in Ireland, the most draconian budget in the history of the Irish State was passed. Cuts across the board were announced, from social welfare payments to child benefit allowances, including cuts of about 5 per cent in the pensions of public servants, and up to 9 per cent for those at the top of the scale. This follows on a reduction in public service pay of about 14% in the past two years, with comparable reductions in private sector pay. In these circumstances, we regard disquisition not reactionary grandstanding or local populism.
Pension cost is a huge part of State expenditure and the cuts in Ireland highlight the vulnerability of pensions during difficult economic times. On top of the economic crisis, other difficulties such as demographic ageing, and changing patterns in labour markets are common challenges faced by many European Member States, despite the strong differences in our pension systems.
Today, I would like to concentrate on one particular issue: the mobility of pensions from one EU Member State to another. We are well placed to make a worthwhile contribution on this particular question, given the EU focus of this debate. Many EU citizens face difficulties in transferring their pensions, and in the Spirit of the EU’s Single Market, it is a problem which the European Union must remedy.
For example, in Ireland, EU workers, of which there are many returning to their countries, cannot take their pensions home, unless there is a suitable vehicle to receive the pensions in their own countries. There is an added problem when the EU country in question is not in the Eurozone, as the currency difference will entail conversion costs.
There are other problems too. The public service pension in Ireland is not transferable under any circumstances, as the State will not pay for transfer costs. If EU nationals are working in the public service in Ireland, they cannot carry their pension over to another pension system. EU nationals are also vulnerable under private sector pension schemes. When working for limited periods, many EU workers in Ireland tend to opt-out from pensions schemes, and are then left with gaps in their pension history.
The IORP Directive, which was implemented in 2003 and amended several times since, is certainly one step in the direction of a Single Market for pensions. However, I do not believe it goes far enough, and I think it is fair to say that its shortcomings may hinder one of the most fundamental values of the European Union, which is the freedom of movement of persons.
I have spoken to the Irish Ombudsman for Pensions, who is strongly advocating for a portable Euro pension bond which could be bought and honoured in every EU Member State, as a single financial instrument for pensions. EU workers could present the bond to a financial institution in a different Member State to the one which it was bought in, without worrying about currency transfer costs in the case of a non-Eurozone country.
I am happy to see that mobility of pensions is one of the elements mentioned in the Commission’s Green Paper on pensions, and I look forward to seeing the results of the consultation on this paper. This idea of a Euro pension bond is a very interesting idea, and I hope it is one which the Commission will look into.
We live in very difficult times. Our pensions systems are under serious strain. In this day and age, when mobility of the EU workforce has never been so strong, it is vital that EU workers’ financial security during retirement is protected.