First the euphoria, then the post-party hangover. It is now approaching three years since the EU directive for institutions for occupational retirement provision (IORP) was passed by the council of ministers. But no true pan-European scheme yet exists, and implementation remains patchy. The directive should have been adopted and fully implemented in all member states by 23 September last year.

11 member states sent reasoned opinion

Earlier this year the Commission sent a ‘reasoned opinion’, the second stage of the infringement procedure to 11 member states, including Finland, that have not fully implemented the occupational pension fund directive (2003/41/EC). The reasoned opinions follow letters of formal notice that were sent in December 2005.

The other 10 countries that were sent reasoned opinions are Belgium, Cyprus, the Czech Republic, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom.

Of the Nordic EU member states, Denmark was the only one to implement the directive on time. Sweden adopted the directive on 1 January 2006 and Finland on 1 June 2006, nearly nine months after the deadline. Norway and Iceland, on the other hand, which are not part of the EU, are also expected to pass the directive as part of the European Economic Area (EEA).

Inge Thygesen, embassy secretary for the Norwegian mission to the EU in Brussels, told nrpn that the directive is expected to be fully implemented in Norway after the next meeting of the EEA committee at the beginning of July this year.

“Adoption of the directive into national legislation in Norway has been delayed because of technical reasons. It was not clear if the directive should be implemented with or without parliamentary discussion. The delay was not in any way connected to the context of the directive because all of its contents are already in place in Norway,” he says.

Remedial action to be taken where necessary

Charlie McCreevy, internal market and services commissioner says that the Commission would continue to take remedial action where necessary. “[The member states, which still lag behind on certain directives] are effectively denying their citizens and businesses across Europe the full benefit of the single market and of measures their governments have themselves agreed on,” he says.

If the member states do not submit a satisfactory reply to the Commission within two months, the matter may be referred to the European Court of Justice.

Political and practical problems with implementation

Ivo van Es, administrator at EC Directorate General Markets and Services, told nrpn that the reasons why the directive has not yet been implemented in several member states vary from political problems to the practical processes of decision making.

“The Czech Republic, for example, has stated that it is having difficulties in implementing the directive in the local context, and that these derive partly from the fact that the country did not take part in the planning of the directive,” he says.

“In case of a number of other countries, like France and Belgium, the text regarding the implementation of the directive is ready, but is awaiting the legislative process,” Mr van Es adds.

Leonardo Sforza, senior consultant at Hewitt Associates, puts forward three main reasons for the late implementation of the directive.

“Firstly, the directive is the victim of bad behaviour by EU member states who generally postpone implementation of EU rules into their national legislation as much as possible. The deadline of 23 September 2005 was not taken seriously enough,” he says.

“Secondly, in some member states, implementation of the directive was not a political priority. In many other countries, the period of transposition coincided with wider pension reform. Thirdly, consultative bodies, such as Ceiops [the committee of European insurance and occupational pensions supervisors], were set up too late.”

Mr Sforza also questions the role of the European Commission in assisting the implementation: “The Commission could have played a more proactive and supportive role in the transition phase. It must change its attitude and resource planning in relation to implementation of new directives.”

Only minimum requirements met in Finland

Piia-Noora Kauppi, a Finnish European Peoples’ Party MEP and a member of the European Committee on Economic and Monetary Affairs (ECON), told nrpn that the reason behind Finland’s delay in implementing the directive was more technical than practical. The directive had been thoroughly debated at the Finnish parliament and was only pending an approval by the head of state. In Finland the directive has been implemented in a simplified form. This means that it covers only pension funds and foundations, leaving out insurance companies and defined contribution (DC) schemes. The directive was finally adopted in the Finnish legislation on 1 June 2006.

Mrs Kauppi points out that there is still scope for further development of the directive in Finland. “The purpose of the directive was to create a field for different pension institutions, which offer second pillar collective schemes, where they could compete freely. In Finland, however, only the minimum requirements of the directive have been adopted into the local legislation and this does not really liberalise competition. There may be underlying reluctance to encourage open competition of pension institutions,” Mrs Kauppi explains.

Jouko Bergius,
 Association of Pension Foundations (Finland)

Jouko Bergius, managing director at the Association of Pension Foundations, says that its members question the decision of Finnish ministry of social affairs and health (STM) not to encourage the creation of DC schemes in Finland. “Various reasons have been given for the delay of the partial implementation of the directive, but the fact remains that without the establishment of DC schemes also at local pension foundations, the directive fails to encourage free competition between pension schemes here.”

Katriina Lehtipuro, deputy director general for the insurance department at STM, however, underlines that a move from a defined benefit to defined contribution based system is still on the cards. “We did try to combine the implementation of the directive with a more thorough reform of the Finnish occupational pension systems,” she says.

“But when we realised that reaching consensus would take longer than we initially estimated, we decided to implement only the obligatory parts of the directive. We expect to proceed with the other reforms later this year,” she adds.

Change set to occur this year

Mr Sforza expects that all member states will have implemented the directive by the end of the year. “There has been an acceleration of the implementation process after the reasoned opinion was sent out. I expect all countries concerned to comply with the formalities by the end of the year. It will, however, be another story to assess how well the member states follow the principles of the directive in practice,” he says.

Mrs Kauppi adds that although leaving DC schemes out from the directive has attracted widespread criticism in Finland, it is up to the practical interpretation of the directive to show how efficient it can be in Finland. “But we do not know yet how the directive will function in practice. It can be made to correspond more closely with the EC approach through more practical interpretation,” she concludes.

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First the euphoria, then the post-party hangover. It is now approaching three years since the EU directive for institutions for occupational retirement provision (IORP) was passed by the council of ministers. But no true pan-European scheme yet exists, and implementation remains patchy. The directive should have been adopted and fully implemented in all member states by 23 September last year.

11 member states sent reasoned opinion

Earlier this year the Commission sent a ‘reasoned opinion’, the second stage of the infringement procedure to 11 member states, including Finland, that have not fully implemented the occupational pension fund directive (2003/41/EC). The reasoned opinions follow letters of formal notice that were sent in December 2005.

The other 10 countries that were sent reasoned opinions are Belgium, Cyprus, the Czech Republic, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom.

Of the Nordic EU member states, Denmark was the only one to implement the directive on time. Sweden adopted the directive on 1 January 2006 and Finland on 1 June 2006, nearly nine months after the deadline. Norway and Iceland, on the other hand, which are not part of the EU, are also expected to pass the directive as part of the European Economic Area (EEA). Inge Thygesen, embassy secretary for the Norwegian mission to the EU in Brussels, told nrpn that the directive is expected to be fully implemented in Norway after the next meeting of the EEA committee at the beginning of July this year.

“Adoption of the directive into national legislation in Norway has been delayed because of technical reasons. It was not clear if the directive should be implemented with or without parliamentary discussion. The delay was not in any way connected to the context of the directive because all of its contents are already in place in Norway,” he says.

Remedial action to be taken where necessary

Charlie McCreevy, internal market and services commissioner says that the Commission would continue to take remedial action where necessary. “[The member states, which still lag behind on certain directives] are effectively denying their citizens and businesses across Europe the full benefit of the single market and of measures their governments have themselves agreed on,” he says.

If the member states do not submit a satisfactory reply to the Commission within two months, the matter may be referred to the European Court of Justice.

Political and practical problems with implementation

Ivo van Es, administrator at EC Directorate General Markets and Services, told nrpn that the reasons why the directive has not yet been implemented in several member states vary from political problems to the practical processes of decision making.

“The Czech Republic, for example, has stated that it is having difficulties in implementing the directive in the local context, and that these derive partly from the fact that the country did not take part in the planning of the directive,” he says.

“In case of a number of other countries, like France and Belgium, the text regarding the implementation of the directive is ready, but is awaiting the legislative process,” Mr van Es adds.

Leonardo Sforza, senior consultant at Hewitt Associates, puts forward three main reasons for the late implementation of the directive.

“Firstly, the directive is the victim of bad behaviour by EU member states who generally postpone implementation of EU rules into their national legislation as much as possible. The deadline of 23 September 2005 was not taken seriously enough,” he says.

“Secondly, in some member states, implementation of the directive was not a political priority. In many other countries, the period of transposition coincided with wider pension reform. Thirdly, consultative bodies, such as Ceiops [the committee of European insurance and occupational pensions supervisors], were set up too late.”

Mr Sforza also questions the role of the European Commission in assisting the implementation: “The Commission could have played a more proactive and supportive role in the transition phase. It must change its attitude and resource planning in relation to implementation of new directives.”

Only minimum requirements met in Finland

Piia-Noora Kauppi, a Finnish European Peoples’ Party MEP and a member of the European Committee on Economic and Monetary Affairs (ECON), told nrpn that the reason behind Finland’s delay in implementing the directive was more technical than practical. The directive had been thoroughly debated at the Finnish parliament and was only pending an approval by the head of state. In Finland the directive has been implemented in a simplified form. This means that it covers only pension funds and foundations, leaving out insurance companies and defined contribution (DC) schemes. The directive was finally adopted in the Finnish legislation on 1 June 2006.

Mrs Kauppi points out that there is still scope for further development of the directive in Finland. “The purpose of the directive was to create a field for different pension institutions, which offer second pillar collective schemes, where they could compete freely. In Finland, however, only the minimum requirements of the directive have been adopted into the local legislation and this does not really liberalise competition. There may be underlying reluctance to encourage open competition of pension institutions,” Mrs Kauppi explains.

Jouko Bergius, managing director at the Association of Pension Foundations, says that its members question the decision of Finnish ministry of social affairs and health (STM) not to encourage the creation of DC schemes in Finland. “Various reasons have been given for the delay of the partial implementation of the directive, but the fact remains that without the establishment of DC schemes also at local pension foundations, the directive fails to encourage free competition between pension schemes here.”

Katriina Lehtipuro, deputy director general for the insurance department at STM, however, underlines that a move from a defined benefit to defined contribution based system is still on the cards. “We did try to combine the implementation of the directive with a more thorough reform of the Finnish occupational pension systems,” she says.

“But when we realised that reaching consensus would take longer than we initially estimated, we decided to implement only the obligatory parts of the directive. We expect to proceed with the other reforms later this year,” she adds.

Change set to occur this year

Mr Sforza expects that all member states will have implemented the directive by the end of the year. “There has been an acceleration of the implementation process after the reasoned opinion was sent out. I expect all countries concerned to comply with the formalities by the end of the year. It will, however, be another story to assess how well the member states follow the principles of the directive in practice,” he says.

Mrs Kauppi adds that although leaving DC schemes out from the directive has attracted widespread criticism in Finland, it is up to the practical interpretation of the directive to show how efficient it can be in Finland. “But we do not know yet how the directive will function in practice. It can be made to correspond more closely with the EC approach through more practical interpretation,” she concludes.

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Round up of member states reaction to EU IORP directive

The pan-European occupational pension fund directive (2003/41/EC) aims to provide a framework for the operation 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.

• The council of ministers of the European Union adopted the directive on 3 June 2003. It was published in the Official Journal of the European Union on 23 September 2003, which made every member state obliged to transpose the requirements of the directive into their national legislation within two years.
  
  
• The benefit of the directive is to allow cross-border affiliation and the opportunity to set up pan-European pension funds, giving greater freedom of choice for company sponsors. The directive also liberalises investments by supporting the prudent person principle.
  
  
• The following countries were sent a reasoned opinion by the European Commission in April this year for not implementing the directive or implementing it partially: Belgium, Cyprus, the Czech Republic, Finland, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom.
  
  
• Since then Slovakia, Spain and Finland have implemented the directive.
  
  
• The member states that implemented the minimum requirements of the directive at the beginning of June are Austria, Denmark, Estonia, Finland, Germany, Greece, Hungary, Ireland, Latvia, Luxemburg, Malta, the Netherlands, Poland, Portugal, Slovakia, Spain and Sweden.
  
  
• At the beginning of June six member states still had not implemented the directive. These were Belgium, Cyprus, Czech Republic, France, Italy and Lithuania. In Slovenia and the UK implementation of the directive was partial.