How does the EU affect national pensions and what is the legal EU framework for cross-border pensions?

This article discusses issues regarding 'conversion', in particular the transformation of second pillar pension rights and entitlements. It considers the different European law regimes that are an influence on conversion, namely EU law and the law regarding the European Convention on Human Rights (hereinafter ECHR). The central question here is: would the outcome be different when conversion is tested under EU law and the Charter of Fundamental Rights of the EU (hereinafter 'the Charter') rather than under ECHR law? The answer seems to be 'yes'. This article demonstrates that EU law and the Charter may offer the pensioner different and possibly more extensive protection, inter alia, against governmental measures than the ECHR. EU law may also have a direct horizontal effect, i.e. the article might be invoked directly against a pension fund. In addition, the test of fundamental rights in the Charter and the ECHR may have entirely different outcomes. More generally, an alleged breach of Article 17 of the Charter must also be reviewed in the light of the EU's economic and social objectives. These objectives are not, as such, part of the ECHR. It is difficult to predict whether a claim, based on Article 17 by an individual against a Member State and/or a relevant pension fund would be successful. Infringement of pension entitlements has not yet been tested against the Charter.

This discussion paper explores how EU law affects national pensions systems, be it directly (by regulating pensions explicitly) or indirectly (by providing a regulatory framework that must be respected in the field of pensions as well as in other fields). Moreover, the focus will be on some fundamental questions: what should be the scope of the IORP directive? Which pension funds and schemes should be subject to it? How do we overcome the political dilemmas when regulating pensions?(Part of the paper appeared in book form in 2012.).

Worldwide we see a move to DC schemes. Most - if not all countries - choose the operate DB next to DC.However, in The Netherlands, the legislator choose for so-called conversion: transforming 'old' DB- to 'new' DC.In 2011, the Dutch legislator introduced the so called 'Pension Custodian'. It could only be used for the Dutch 2nd pillar DC IORP, the PPI. This Pension Custodion should *not* be confused with the IORP II Custodian.However, with the implementation of the IORP II directive, the Pension Custodian can also be used for European pension funds. This offers new - but already existing! - opportunities for cooperation between pension funds in Europe. All the mechanisms that apply to the Pension Custodian already exist since 2011 when the PPI Act came into force.The Pension Custodian can thus potentially be used as the ultimate 'ringfencing tool' for pension funds where DB en DC rights can be operated simultaneously. The Pension Custodian creates a hard property law separation between assets belonging to pension schemes. As the right of ownership is also not affected and the individual objection is preserved, the Pension Custodian, as outlined above, can be a very good alternative to the Dutch conversion.

Mandatory pension participation in the Netherlands is currently under review. This article examines the manner in which the system of mandatory participation in sectoral pension funds is presently organised as well as future proposals from the perspective of the freedom to provide services. It also briefly reviews mandatory participation in Belgium, Denmark, Germany, France and Sweden and asks whether it constitutes a barrier to the freedom enshrined in Article 56 TFEU. Restrictions of this freedom in the field of mandatory participation are too easily excused in the Netherlands by pointing to decisions by the European Court of Justice (ECJ) in which it judged the system to be permissible. These decisions, however, were made from the perspective of competition law, and not on the basis of Article 56 TFEU. Grounds for justifying restrictions to this freedom exist, although different justifications are available for direct and indirect discrimination. The article questions how mandatory participation in the Member States considered in this article fare from this perspective?

Both Collective Defined Contribution (CDC) and Collective Individual Defined Contribution (CIDC) schemes place any risks on pension scheme members instead of an external risk-bearer. In CDC schemes, assets are pooled collectively, allowing for risks to be shared between pension scheme members. In Individual DC schemes (IDC), the scheme members bear such risks individually. But CDC's collective nature leaves little room for individual risk management and the pension assets are allocated to scheme members via rules that are often complex and ambiguous. CIDC schemes strive to retain the desirable aspects of CDC and IDC schemes, while improving on some of the drawbacks. The drawbacks of a CDC scheme are mitigated by the introduction of 1) individually quantifiable pension pots through individual accounts, 2) individual risk management and 3) a simplified scheme. The drawbacks of an IDC scheme are mitigated by 1) mandatory participation, 2) collective management of assets, and 3) sharing of risks. It therefore seems that CIDC schemes have a number of important advantages over CDC schemes. CIDC scheme members should be clearly informed of their legal position vis-à-vis their employer and pension provider, and the contract should clearly define the risks. Scheme members appear to benefit from individual risk management and individually identifiable pension pots, while employers and/or pension providers seem relieved from risks and enjoy the security of fixed pension contributions. The possibility to take out a lump sum seems contrary to the collective sharing of risks in both CIDC and CDC schemes.

Dutch Abstract: Op 1 janu ...

A few years ago, this magazine addressed some pension issues. It seems time for an update on these matters. What is anno 2018 the state of affairs in the EU regarding pensions? In this article, we will explore the European pension landscape further and highlight developments that in our view form the basics of what we refer to an 'EU Pension Union'. We will also discuss the 'Pan European Pension Product' (PEPP), the latest of the European developments of the internal pension market, which could be an improvement for undertakings and individuals, who are faced with many different pension schemes and pension funds in several jurisdictions.

The Cross Border Benefits Alliance-Europe (www.CBBA-Europe.eu) believes that the manner in which the Dutch government transposed article 12 paragraph 3 of the Directive (EU) 2016/2341, better known as the “IORP 2” Directive, to be inconsistent with EU law. Article 12(3) IORP 2, refers to cross border transfers of pension schemes, provides for prior approval of a majority of members and beneficiaries, and allows member states to define such a majority “in accordance with national law”.The Dutch Ministry of Social Affairs, however, is currently requiring a majority of 2/3 of both the members and beneficiaries for such approval. Such a “super-majority” requirement not only creates a significant obstacle to cross-border transfers of Dutch based pension schemes, which is the apparent purpose of new IORP 2; but it also violates the EU principle of non-discrimination based on nationality of the pension scheme1 , which is a pillar of EU law, because it would generate an unequal treatment between domestic transfers of pension schemes in the Netherlands, and cross border transfers to pension schemes in other parts of the European Economic Area.CBBA-Europe believes that the most reasonable interpretation of the sentence “in accordance with national law” should be in the sense that the same majorities of members and beneficiaries requested to approve transfers of domestic transfers provided by national laws, should be equally applicable to cross border transfers. Unequal treatments between national and European situations might be legally acceptable only if justified. One possible argument would be the aim of protecting members and beneficiaries in case of cross border transfers due to unclarity and/or shortcomings of the Directive. However, in the view of CBBA-Europe, the provisions of the IORP 2 Directive sufficiently protect members and beneficiaries in these situations. Therefore, majority requirements unreasonably strict, or in any way higher than the national rules on transfers are not justified.

In 2015, a Dutch newspaper NRC Handelsblad featured an interview with President of the European Court of Justice (ECJ) Koen Lenaerts, who was quoted as saying that his court “is what keeps the European wheels turning.” In this article, we discuss a selection of ECJ judgments that emphasize the aforementioned quote. In spite of the fact that some of these court judgments do not revolve around cases involving pensions, they are relevant for the pension and financial sectors and illustrate the far-reaching harmonization of European cooperation. Those who believe that this process is breaking down at the hands of Eurosceptic politicians have not sufficiently considered the court's role.