European Parliament Due To Vote On Cross-Border Pensions Directive

by Ulrika Lomas, Tax-News.com, Brussels

11 March 2003

The European Parliament has pencilled in today for a vote on the Occupational Pensions Directive, with Parliamentary spokesman Othmar Karas saying that harmonised fiscal treatment of supplementary cross-border pensions is set to "come closer". If the EP votes in favour, the Directive will become part of EU law in 2005.

According to the draft agenda of the forthcoming plenary session of the Parliament in Strasbourg, a vote on the revised EU directive is now "possible" today. The Directive is intended to help companies set up cross border European pension schemes,

"After 12 years, the prospect of introducing supplementary cross-border pension schemes across the EU will come closer when MEPs vote on a carefully crafted common position reached by Council," says Austrian MEP Karas, the Parliament's rapporteur for the directive. Karas added that attention would now focus on amendments being proposed by the Parliament's Economic and Monetary Affairs Committee.

"While no attempt is made to change the technical investment rules, several amendments take up issues where practices are different in the Member States over social benefits such as disability or provision for survivors and limits placed on a pension paid out as a lump sum," Karas said in a statement.

One of the amendments reflects a victory won last week by Britain's company pension scheme industry after a campaign by the UK pensions industry represented by The Association of British Insurers, and the National Association of Pension Funds forced the European Union to reverse plans to remove the tax-free lump sum workers in the UK receive from 25% of their pension fund when they retire.

The Directive's chances of success were enhanced last October when the European Court of Justice held that payments made voluntarily into a pension scheme in another member state should be allowed to benefit from tax breaks available in the state where the pension scheme operates.

The words of the Court were general enough: "Governments should not be restricting or disallowing tax deductions applying to contributions to voluntary pension schemes paid to pension providers in other member states"; but it seems unlikely that the Court's intention was to allow complete freedom for pension scheme shopping across the Union. However, that is the goal of most multinational companies in Europe, who suffer from constant and expensive problems over pension provision if they move employees between countries.

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