08/12/2010Hands off our pensions
Hands off our pensions
Comment
PIETER OMTZIGT
(appeared in the Financial Times, 6 December 2010)
On Monday the European ministers of social affairs will discuss the Green Paper on pensions. This paper contains no less than 14 proposals for legislation or other initiatives by the Commission in this field.
They will not make life better and easier for pensions in Europe or for its citizens. The European Council should thus reject those proposals and focus on the heavy economic problems it is already tackling.
Pension systems vary widely in Europe and a one size fits all approach will have severe consequences for the minority of countries with pension funds. After the effective nationalisation of the private pension schemes in Hungary and Poland last week, only a handful of countries have large pension reserves. Think of the UK, the Netherlands, Sweden and Denmark. European rules will thus be tailor made for the majority of countries that rely on a state pension, funded on a pay-as-you-go basis. That is exactly contrary to the official aim of the Commission to have a more balanced approach across Europe.
The European commission should first ask itself the question: whose money is in the pension funds? These are national funds, paid for by employers and employees. It is not government money. It is not European money. This in itself is more than sufficient reason for the commission not to extend its power to national pension systems. Only for cross-border workers (a tracking service) can an exception be made.
Second, would a free European market improve pensions? My answer is: probably not. After pension mis-selling scandals in countries like the UK and the Netherlands stricter rules were put in place that seem to work quite well.
Third, have we learned lessons from the crisis and would the EU have the span of control to enter into this vast policy field, while the European financial sector is still in intensive care?
Legitimate questions are posed about whether certain financial institutions were too big and could not be properly controlled by the home country.
Well, if you want to create a single European Pension market, we should first decide which lessons to heed. For more than 20 years the commission has tried to introduce portability, that is the right and obligation to transfer pension rights. That will not work as long as most countries do not have funds but black holes. It will only lead to transfers from funds to holes, but not the other way, because there is nothing to transfer.
The temptations in Europe are very large. The Dutch pension sector alone controls more than €750bn ($991bn), about as much as is available in the Eurocrisis fund, if the maximum can ever be used. But this money cannot and will not be brought under European control. The Dutch parliament unanimously approved my recommendation to that effect.
I count on support from fellow nations and MPs to rely far less on European pensions and money. The end of the proposals in the green paper would be the best start for that.
Pieter Omtzigt is Christian democratic MP in the Netherlands and pension spokesman
