British Insurers Lobby European Parliament Over Pensions Directive

by Ulrika Lomas, for LawAndTax-News.com, Brussels

03 March 2003

Following a vote by the Economic and Monetary Affairs Committee of the European Parliament last week on the EU's Occupational Pensions Directive, MEPs have been urged by the Association of British Insurers to reject amendments to the Directive, which allows workers of multi-national companies to have access to cross border occupational pension schemes.

Stephen Sklaroff, Deputy Director General of the ABI, explained that whilst the British Insurance industry's lobby group supported the Directive's intention to ensure flexibility, security and consumer protection, and to preserve existing national pension systems, there were strongly held reservations about some of the Directive's detail.

The point of contention is a Directive requirement that would disallow UK pensioners the right to withdraw up to 25% of their accumulated pension fund at retirement without payment of income or capital taxes on that sum. Following a consultation process begun in 1997, the Council of Ministers agreed in November 2002 that two principles would be followed in the Directive: no interference with national systems, and preservation of existing national systems.

"On the face of it, the Parliament's new amendments endanger the tax-free lump sum, which is an important part of the UK pensions system and a significant benefit to UK savers. We are concerned that this change could seriously disadvantage savers at a time when we need to encourage people to save more for their retirement, not only in the UK but in all 15 Member States. We believe that the focus of this debate should be on practical solutions that will benefit all savers," stated Mr Sklaroff at a trade conference.

The European Parliament is due to stage the second reading of the directive on March 13th and if it is adopted, it will become part of UK law in 2005.

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