The European Commission has decided to pursue infringement procedures against 11 Member States, including the United Kingdom, for failure to implement in national law the directive on occupational pensions.
It has decided to formally request Belgium, Cyprus, the Czech Republic, Finland, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom to complete their implementation of the Directive on Occupational Pensions, and Belgium and Italy to complete their implementation of the Prospectus Directive.
These requests take the form of “reasoned opinions”, the second stage of the infringement procedure laid down in Article 226 of the EC Treaty. If there is no satisfactory reply within two months, the Commission may refer the matter to the European Court of Justice.
The Commission says it has decided to send reasoned opinions to the Member States concerned, for not having written Directive 2003/41/EC on the activities and supervision of Institutions for Occupational Retirement Provision (IORP Directive) into their national laws, or for having done so only partially.
The Directive should have been incorporated by all Member States by 23 September 2005, and the reasoned opinions follow letters of formal notice sent in December 2005.
It says the IORP Directive is part of the Financial Services Action Pan and completes the internal market as far as institutions providing occupational pensions are concerned.
The IORP Directive aims to provide a framework for the operation of and supervision of occupational pension schemes, which includes regulations on cross-border schemes, auditing and accounts, trust exemptions and what constitutes an occupational pension scheme.
One of the issues which it affects is the legitimacy of life-assurance only plans, and whether they are classed as occupational pension schemes, which has happened as article 7 of the Directive has been incorporated into section 255 of the Pensions Act 2004.
The problem is the Directive sees pension schemes as mainly providing retirement benefits, not life assurance benefits, although it recognises life assurance benefits can be provided by pension schemes, but only in addition to retirement benefits.
At the moment, there are three instances where members could have a pension only providing life assurance:
- where a member is waiting to join a pension during a probationary period;
- where they have been offered a pension but chose not to join, or
- where a final salary scheme has closed, and they are in a group personal pension but are covered by life assurance from the final salary scheme.
Pension experts suggest the first two cases will be allowed, but the third is not as there is no pension provision attached to the life assurance. Steve Bee, head of pensions strategy at Scottish Life, writing on his Beehive website, suggests the problems exist because of trying to incorporate EU pensions strategy to a completely different UK system.
And in a consultation document on the consequences of implementing the cross-border requirements of the Directive, issued in November 2005, the Department for Work and Pensions (DWP) states “given the complexity of this particular issue, the UK has decided it is necessary to delay the full implementation for a short time to ensure that the legislation is fit for purpose”.
However, the Commission adds, while recognising Member States' systems for occupational pensions differ widely, the Directive “provides harmonised rules for prudential supervision and capital requirements for these institutions, as well as also laying down rules for the cross-border provision of occupational pensions”.
Charlie McCreevy, the Internal Market and Services Commissioner, says the recent progress of Member States in implementing single market laws has been impressive, as the results of the latest Internal Market Scoreboard show.
But he adds: “However, some Member States still lag behind on certain Directives and are effectively denying citizens and businesses across Europe the full benefit of the single market and of measures their governments have themselves agreed. The Commission will do all it can to help Member States implement laws on time, but will continue to take remedial action where necessary."
Ben Lloyd, a spokesman for the DWP, says the department is aware of the 'reasoned opinion' issued against it, but says the Directive has been fully implemented apart from paragraph C, in article 16.2.
He says this paragraph is about the necessary provision of information the DWP requires in terms of scheme-wind-ups, and states progress is underway in bringing in secondary legislation to meet the requirements of the Directive.
LLoyd adds: "This means statutory instruments will be brought in, and we have already opened a public consultation on this draft legislation. But we will obviously be seeking to implement this legislation as quickly as possible."
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
Our regular video series continues
Investor focus shifts to risk
Joined with 21 Partners
Adds £130m assets under influence
Nexus IFA among first to sign up