The UK has been referred to the European Court of Justice for not fully implementing an internal EU Directive on pensions.
In April, the European Commission issued infringement proceedings against the UK and 10 other EU states for failing to fully introduce Directive 2003/41/EC on the activities and supervision of Institutions for Occupational Retirement Provision (IORP Directive) into national law.
The 11 states, which also included France, Spain and Italy, had two months to comply with the ‘reasoned opinions’ brought against them, however as the UK and Slovenia both failed to reply to the notices, the Commission has now referred the two countries to the European Court of Justice for the next stage of infringement proceedings.
As part of the Financial Services Action Plan, the IORP Directive completes the internal market as far as institutions providing occupational pensions are concerned, and should have been implemented by all member states by 23 September 2005.
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 way in which it has already altered UK pension legislation is through article 7 in section 255 in the Pensions Act 2004 which stops life assurance only schemes being classed as occupational pensions.
At the moment there are three ways in which members may have life assurance benefits without pension benefits:
- 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,
- 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.
But following the introduction of the Directive and the changes to article 7 of section 255, in theory this means the first two scenarios are fine, but the third would not be allowed as there are no pension benefits attached.
The Commission says while it recognises systems for occupational pensions vary widely among member states, the Directive “provides harmonised rules for prudential supervision and capital requirements for these institutions”.
It also claims the Directive sets out rules for the cross-border provision of occupational pensions, as the current systems of implementation “prevents pension institutions from providing cross-border services under equal conditions throughout the internal market”.
Charlie McCreevy, internal market and services commissioner, says although member states have recently made impressive overall progress in implementing single market laws, some unfortunately still lag behind.
He adds: “In doing so they 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.”
A spokesperson for the Department for Work and Pensions says the Directive has been fully implemented except for paragraph c of Article 16.2, and the government has taken steps this week to implement this paragraph with the laying before Parliament of The Occupational Pension Schemes (Winding up Procedure Requirement Regulations 2006).
The spokesman adds: "These will come into force on 24 July 2006. We have been in discussion with the Commission who are aware the necessary steps were being taken to ensure full implementation. We are writing formally to the Commission to let them know this is now complete."
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
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