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European Directive on minimum requirements for enhancing worker mobility by improving the acquisition and preservation of supplementary pension rights- previously called the Portability Directive
This Directive, proposed by the European Commission, aims to facilitate the exercise of the right of workers to freedom of movement and to facilitate workers’ occupational mobility within the same Member State, by reducing the obstacles created by certain rules governing supplementary pension schemes.
The Commission believes that the significant reduction of workers’ pension rights when they move job places a constraint on professional movement. The Directive has 3 key elements -
- Acquisition of pension rights - joining and vesting in schemes within a reasonable time of starting a job (applying to workers changing jobs not just those crossing borders);
- Preservation of dormant rights;
- Information – on how moving jobs will affect pension rights (disclosure).
In October 2007 the Commission adopted an amended proposal. This focuses on the setting of minimum requirements for better access to pension rights, clearer rights of preservation so mobile workers' pensions are treated fairly and improved access to useful and timely information. Provisions relating to transfers are no longer present in the proposal.
Impact on schemes
From a UK perspective, the Directive covers occupational pension schemes which are open to new entrants and which are not in the Pension Protection Fund (PPF) or a PPF assessment period.
The Government has two reservations about the latest draft of the Directive:
- there is no UK legislation on waiting periods and the Government does not accept the proposal to set a maximum waiting period of one year; and
- the UK's policy is that the vesting period - (the period of membership of a scheme before entitlements are triggered) - should not exceed two years for anyone aged 21 or over.
It hopes to be able to negotiate acceptable amendments on both points.
The Commission has not indicated when the Directive will be implemented. We understand that the proposal is on hold for the time being.
Author: Eleanor Daplyn