Resumen para el ciudadano Propuesta de la UE: consulta pública sobre las pensiones

¿DE QUÉ SE TRATA? Ante el envejecimiento de la población de la UE, muchos países reforman sus regímenes de pensiones. Por otra parte, la reciente crisis financiera y económica ha puesto de manifiesto una serie de problemas que las aquejan. De ahí que la UE deba replantearse su labor en este campo. ¿A QUIÉN BENEFICIARÍA Y CÓMO? • • • A todos los ciudadanos de la UE a la hora de planificar y percibir su pensión A las partes interesadas, que podrán dar su opinión sobre cómo la UE puede ayudar mejor a los países miembros a elaborar su política de pensiones A los gobiernos nacionales que colaboran con la Comisión Europea en temas de pensiones, pues la política de la UE en este campo se someterá a revisión exhaustiva.

¿POR QUÉ MEDIDAS EUROPEAS? La UE coordina una serie de políticas y regula determinados aspectos que inciden en las pensiones. Tomar medidas europeas permitirá a los ciudadanos de la UE sacar pleno provecho del mercado interior (al aumentar las opciones de pensión a costes más bajos en todo el territorio) y aumentará la estabilidad de las finanzas públicas y la economía de la UE. ¿QUÉ CAMBIARÁ EXACTAMENTE? En la consulta se recabarán los comentarios de todas las partes interesadas sobre lo que la UE puede hacer para contribuir a unas pensiones adecuadas y seguras en el futuro. En una fase posterior podrían proponerse cambios en la legislación de la UE. ¿CUÁNDO ENTRARÍA EN VIGOR LA PROPUESTA?

La consulta se inicia el 7 de julio de 2010 y finaliza el 15 de noviembre de 2010. Para enviar sus comentarios, utilice el cuestionario en línea http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=pensions o remítalos a las direcciones postales indicadas en el documento oficial de la consulta pública. En su caso, la Comisión presentará las propuestas oportunas en una fase posterior.

EUROPEAN COMMISSION

Brussels, 7.7.2010 COM(2010)365 final

GREEN PAPER towards adequate, sustainable and safe European pension systems

SEC(2010)830

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GREEN PAPER towards adequate, sustainable and safe European pension systems

1.

INTRODUCTION

An adequate and sustainable retirement income for EU citizens now and in the future is a priority for the European Union. Achieving these objectives in an ageing Europe is a major challenge. Most Member States have sought to prepare for this through pension reforms. The recent financial and economic crisis has aggravated and amplified the impact of the severe trend in demographic ageing. Setbacks in economic growth, public budgets, financial stability and employment have made it more urgent to adjust retirement practices and the way people build up entitlements to pensions. The crisis has revealed that more must be done to improve the efficiency and safety of pension schemes1 which not only provide a means for a decent life in old age but also represent the reward for a lifetime of work. In his political guidelines for this Commission, President José Manuel Barroso highlighted the importance of adequate and sustainable pensions for strengthening social cohesion: "Millions of Europeans are wholly dependent on pensions. The crisis has shown the importance of the European approach to pension systems. It has demonstrated the interdependence of the various pension pillars within each Member State and the importance of common EU approaches on solvency and social adequacy. It has also underlined that pension funds are an important part of the financial system. We need to ensure that pensions do the job intended of providing the maximum support to current and future pensioners, including for vulnerable groups." Member States are responsible for pension provision: this Green Paper does not question Member States' prerogatives in pensions or the role of social partners and it does not suggest that there is one 'ideal' one-size-fits-all pension system design. The principles of solidarity between generations and national solidarity are key in this regard. At EU level, national retirement systems are underpinned by a framework of activities spanning from policy coordination to regulation. Some common themes need to be addressed in a coordinated way such as the functioning of the internal market, the requirements of the Stability and Growth Pact, or ensuring that pension reforms are consistent with the Europe 2020 strategy. Sound and adequate pension systems, enabling individuals to maintain, to a reasonable degree, their living standard after retirement, are crucial for citizens and for social cohesion. The impact of public pension expenditure on public finances in one Member State may have serious repercussions in others. EU policy coordination on pensions has proven useful and necessary to make progress at Member State level. Pension funds are an integral part of financial markets and their design can promote or inhibit the free movement of labour or capital.

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The European Parliament is also engaging in a policy discussion on the lessons learnt from the crisis under the auspices of the Special Committee on the Financial, Economic and Social Crisis.

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Following a decade of reforms that have altered pension systems in most Member States, there is now a need to thoroughly review the EU framework. Demographic ageing has been faster than previously expected and the recent financial and economic crisis had a dramatic impact on budgets, capital markets and companies. There have also been deep structural changes such as new intergenerational balances, shifts from Pay-As-You-Go (PAYG) to funded pensions and the shift of more risks to individuals. This Green Paper launches a European debate through extensive and early consultation on the key challenges facing pension systems and how the EU can support Member State efforts to deliver adequate and sustainable pensions. This Green Paper takes an integrated approach across economic, social and financial market policies and recognises the links and synergies between pensions and the overall Europe 2020 strategy for smart, sustainable and inclusive growth. It takes into account work by the Economic Policy Committee and the Social Protection Committee on pensions. The Interim Joint Report was noted by the 7-8 June 2010 Council (ECOFIN and EPSCO)2. The goal of generating adequate and sustainable retirement incomes through pension reforms and the goals of Europe 2020 are mutually reinforcing. Europe 2020 emphasises higher and better quality employment and positive transitions: both are decisive for workers (women and men) to accrue pension rights. Its 75% employment target requires employment rates significantly higher than the present levels in the age group 55 to 65. Addressing gaps in pension adequacy, which can be a significant cause of poverty among the elderly, can also contribute to achieving the Europe 2020 poverty reduction target. Policies in many areas can help to reduce poverty in older ages and this will in turn contribute to enhancing adequacy, thus complementing pension reforms. Other goals include tackling bottlenecks in the completion of the single market, for example making the internal market in financial products safer and more integrated and facilitating the mobility of all workers3 and citizens across the EU4. In turn, pension reforms will contribute towards reaching the Europe 2020 goals for employment and long-term sustainability of public finances. Moreover, completing the internal market for pension products has a direct impact on the EU's growth potential and therefore directly contributes towards meeting the Europe 2020 objectives. 2. 2.1. KEY CHALLENGES Demographic ageing

Whilst it is well known that Europe is facing a major demographic challenge5, we are reaching a critical stage as the first cohorts of baby boomers are now approaching retirement and Europe's working-age population is set to start shrinking from 2012 onwards.

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Report available at http://europa.eu/epc/publications/index_en.htm, see Council Conclusions http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/114988.pdf. Including highly mobile workers such as researchers, see Council Conclusions 2 March 2010: http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/intm/113121.pdf. The Commission will issue a Report on Citizenship in 2010 on the entire life cycle of EU citizens, covering i) obstacles in the effective exercise of citizens' rights, including free movement rights, and ii) the solutions envisaged to remove these obstacles, along with a Roadmap for their adoption. Commission communication on Ageing of 29th April 2009 "Dealing with the impact of an ageing population in the EU (2009 Ageing Report)" and Commission staff working document Demography Report 2008 – Meeting social needs in an ageing society (SEC (2008) 2911).

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Living longer than ever before is of course an enormous achievement: over the last 50 years, life expectancy has risen by about five years in the EU. The latest demographic projections6 reveal that a further rise of about seven years could materialise by 2060. Combined with low fertility rates this will lead to a dramatic change in the age composition of the population (see figure 1). As a result, the old-age dependency ratio will double: where at present there are four people of working age for every person over 65, by 2060 there will be just two people of working-age for every person over 65 (see figure 2). There are also other longstanding trends in labour markets: starting full-time working lives later because of the increased need for education and retiring earlier due to labour market age management and prevailing policies. Although the trend of early retirement has started to reverse, most people, and women in particular, still leave the labour market significantly before the typical pensionable age of 65 (see figure 6 and 7), highlighting the gender aspect. On present trends the situation is untenable. Unless people, as they live longer, also stay longer in employment, either pension adequacy is likely to suffer or an unsustainable rise in pension expenditure may occur. The impact of the demographic challenge as aggravated by the crisis will tend to reduce economic growth and put pressure on public finances. The 2009 Ageing Report7 showed that, on account of the shrinking labour force, the only source of growth by 2020 will be labour productivity. While reforms have already significantly reduced the impact of ageing on future pension costs, age-related public expenditure is still set to increase overall by almost 5 percentage points of GDP by 2060, half of which is due to spending on pensions (see figure 3 for public pension expenditure projections for Member States). Another longstanding trend is societal change – such as single households, couples without children and different generations of a family living far apart from each other – which is fuelling more formal provision of care services otherwise provided within the family. This poses further challenges to the financing of the cost of health care and long-term care. Funded pensions could also be affected by demographic ageing. Ageing societies would reduce the potential growth rate of the economy, implying lower real rates of return and this could also affect financial asset prices. Such potentially lower returns on pension fund investments may lead to higher contributions, lower retirement benefits, increased capital outflows to emerging markets or greater risk taking. Against the background of demographic ageing, the 2001 Stockholm European Council agreed a three-pronged strategy for dealing with the impact on public budgets consisting of: – reducing debt rapidly; – raising employment rates and productivity; and – reforming pension, health care and long-term care systems.

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European Commission and Economic Policy Committee (2009) "2009 Ageing Report: Economic and budgetary projections for the EU-27 Member States (2008-2060)", European Economy, No 2. Ibid.

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Moreover, the 2001 Laeken European Council agreed a set of common objectives for pensions emphasising the need to make them adequate, sustainable and adaptable8. 2.2. Changes in pension systems

While Member State systems differ markedly, a majority have been adapted so as to put them on a more sustainable footing over the past decades. At the same time, Member States have attempted to protect adequacy and to respond better to changes in labour markets and gender roles. Key trends have been9: (1) Encouraging more people to work more and longer so as to obtain similar entitlements as before: increases in pensionable ages; rewarding later and penalising earlier retirement (see figure 8); moves from benefits based on earnings in best years towards entitlement based on working career average earnings; closing or restricting early exit pathways; labour market measures to encourage and enable older workers to stay in the labour market and encouraging greater gender equality in the labour market. The move from largely single to multi-tiered systems. This is a result of the trend in most, but not all, Member States to lower the share of public PAYG pensions in total provision while giving an enhanced role to supplementary, prefunded private schemes, which are often of a Defined Contribution (DC) nature (see figure 10). Measures to address adequacy gaps, e.g. through efforts to broaden coverage, support building up rights, ease access to pensions for vulnerable groups and increase in financial support for poorer pensioners. Gender dimension: women tend to predominate among those with atypical contracts, they tend to earn less than men and tend to take career breaks for caring responsibilities more often than men. As a consequence, their pensions tend to be lower and the risk of poverty tends to be higher among older women, also because they live longer. While periods of care are recognised in some PAYG systems, this is less straightforward in funded pension schemes, with the question of how to finance such solidarity.

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Reforms have underpinned recent increases in effective retirement ages and opened new avenues to delivering adequate pensions in a sustainable manner. At the same time, reforms have given and will continue to give rise to greater individual responsibility for outcomes. While people have more choice, they are also exposed to more risk. For reforms to be successful, all pension schemes must deliver their part and risks must be well understood and managed. Future pension adequacy will rest on a combination of returns in financial markets and labour markets delivering opportunities for longer and less broken contributory careers. To strengthen social cohesion, a number of Member States may want to address outstanding issues such as minimum pensions, coverage of atypical workers and crediting of some involuntary employment breaks, for example when caring for frail dependents.

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"Quality and viability of pensions – Joint report on objectives and working methods in the area of pensions" [10672/01 ECOFIN 198 SOC 272]. The Interim Joint Report on pensions of the Economic Policy Committee and the Social Protection Committee contains a more detailed assessment, see footnote 2.

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The reformed pension systems increase adequacy risks for a considerable number of workers. Net replacement rates will decline in many Member States, though the starting position and the degree of reduction vary significantly, and some countries, especially those with very low initial levels, have increased them (see figure 5). Delaying labour market exit can reduce the decline. In many Member States additional reforms may be needed given the scale of demographic changes ahead and to ensure the lasting success of implemented reforms. For Member States where the reform process is not sufficiently advanced, there is an urgent need to review the pension promise in view of what the rest of the economy – and public budgets - can be expected to provide. 2.3. Impact of the financial and economic crisis

The financial and economic crisis has seriously aggravated the underlying ageing challenge. By demonstrating the interdependence of the various schemes and revealing weaknesses in some scheme designs it has acted as a wake-up call for all pensions, whether PAYG or funded: higher unemployment, lower growth, higher national debt levels and financial market volatility have made it harder for all systems to deliver on pension promises. Private schemes can relieve some of the pressure on public pension provision. However, increasing reliance on private schemes has fiscal costs, given the widespread practice of providing tax incentives during the accumulation phase. The costs of tax relief can be considerable and its effectiveness and redistributive impacts questionable10. With public budgets under heavy pressure, some Member States are now reconsidering the efficiency of this spending. Better sharing of information on its costs and effectiveness may help policy makers across the EU11. Furthermore, if private schemes cannot deliver their promises, there will inevitably be pressures on the public purse to pick up part of the tab. With secure incomes from public pensions, which generally have been allowed to perform their role as automatic stabilisers, current pensioners have so far been among those least affected by the crisis. Exceptions apart, benefits from funded schemes still play a marginal role and just a few Member States with very acute public budget problems or well-anchored automatic adjustment mechanisms were compelled to reduce public pensions in payment. But the crisis and lower growth prospects will affect all types of pension schemes. The scale of fiscal deterioration following the crisis is equivalent to offsetting 20 years of fiscal consolidation, implying that fiscal constraints will be very strong in the next decade. Estimates suggest that the crisis will put further pressure on public pension spending over the long-term because economic growth is set to be considerably lower and there is great uncertainty as to the timing of the full recovery.12 In a number of Member States some social security contributions were diverted to newly established mandatory funded pensions. The crisis has underscored this double payment problem and has caused a few governments to halt or lower contributions to private pensions to improve public pension finances.

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Section 4.2 p. 26 of SPC Report "Privately managed funded pension provision and their contribution to adequate and sustainable pensions" (2008) http://ec.europa.eu/social/main.jsp?catId=752&langId=en. This could include sharing experience on approaches such as 'communicating vessels' whereby the amount of tax relief available for voluntary individual savings is inversely related to the amount of statutory and occupational pensions an individual already has. See the "Proposal for a pension model with a compensating layer" by G.J.B. Dietvorst, EC Tax Review 2007 nr.3 p.142-145. See footnote 6.

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In the short term, the return rates and solvency of funded schemes have been affected through falls in interest rates and asset values: private pension funds lost over 20% of their value during 200813. Moreover several sponsors of occupational pension funds were hindered in their ability to honour their obligations. However, as few schemes had to lock in losses to meet their current liabilities, supervisors were able to ease valuation and solvency regulations to allow time for markets to recover. Pension funds were able to recoup some of their losses in 200914 but many still remain far off the required solvency levels. Variations in the ability of funded schemes to weather the crisis have demonstrated that differences in design, regulation and investment strategy clearly matter. Losses vary with investment practices and the ability to absorb the shock depends also on how well the burden is shared among providers, contributors and recipients. Unfortunately, schemes in countries where solvency requirements were lower and asset value losses particularly large also tend to have poorer protection of accrued entitlements and the least flexible mechanisms for burden sharing. As a result, entitlements can be lost and providers inclined to discontinue schemes, since they cannot afford to bring schemes back to solvency. The crisis will also have a serious impact on future pensions as many workers will have lost their jobs and have been unemployed for a certain period and others might have had to accept lower earnings or shorter working hours15. One of the challenges will be to ensure that adequate levels of pensions can be maintained also in these situations (see figure 9). The crisis has, therefore, added the following dimensions to the pre-existing reform agenda: – a more pressing need to address adequacy gaps; – a more pressing need for reforms that improve the sustainability of public finances; – an increased emphasis on raising effective retirement ages; – a need to revisit the regulation of funded pension schemes to ensure that they are efficient and remain safe in the wake of major financial crises whilst ensuring regulation is proportionate and does not push employers into insolvency or into abandoning pension schemes; – a need to ensure that financial market regulation is effective and intelligent given the growing role of pension funds. The G20 Pittsburgh and Toronto summits emphasised that all financial institutions should be regulated and that there is a greater need for common rules. 3. PRIORITIES FOR MODERNISING PENSION POLICY IN THE EU

The overarching objectives of pension reforms are to ensure that pension systems are adequate and sustainable. There has been a tendency to treat the three-pronged Stockholm strategy as a list from which to pick and choose. But if pension systems are to deliver and if

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OECD, "Pensions and the crisis – How should retirement income systems respond to financial and economic pressures" 2009. OECD "Pension Markets in Focus", October 2009, Issue 6. Chapters 3.3 – 3.5 of the Interim Joint Report on pensions, see footnote 2.

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the Europe 2020 strategy is to succeed, it will now be necessary to address all three issues in a coordinated way. 3.1. Overarching objectives: adequacy and sustainability

Adequacy and sustainability are two sides of the same coin. If pensions are at risk of being inadequate, there may be pressure for ad hoc increases in pensions or higher demand for other benefits, jeopardising sustainability. Equally if a pension system is unsustainable it will prove to be inadequate in the long run when sudden corrections are needed. The issues of pension adequacy and sustainability need to be considered jointly. Addressing pension adequacy Ensuring adequate retirement income is the purpose of pension systems and is a matter of fundamental inter- and intra-generational solidarity. Most reforms of pension systems so far have been aimed at improving sustainability. Further modernisation of pension systems will be needed to address adequacy gaps. As public pension replacement rates in most cases will decline (see figure 4), it is important to provide sufficient opportunities for complementary entitlements: e.g. enabling longer working lives and increasing access to supplementary pension schemes. The lack of compensatory crediting for periods of unemployment, sickness or caring duties can also lead to gaps, as can lack of coverage of vulnerable groups, such as short-term contract and atypical workers, or insufficient minimum pension guarantees or income provision for older people, but these raise questions about financing. In funded schemes, reducing investment risk, notably close to and in the pay-out phase, and improving risk sharing between pension savers and pension providers, building on the advantages of collective insurance, can boost the adequacy of retirement income. Broadening the sources of retirement income beyond pensions may also need to be considered. Securing sustainability Many pension reforms have contributed to limiting the increase in future public pension spending, but additional steps are urgently needed to put systems on a more sustainable footing, thereby contributing to the long term sustainability of public finances, notably in countries where future public pension spending is projected to be high. Failing to take resolute policy action to enhance sustainability will push the burden of adjustment forward either to future workers or to future pensioners who might not have prepared for lower than expected pensions, as underlined by the European Council16. Given the dire state of public finances and the projected unsustainable increase in public debt levels with unchanged policies, fiscal consolidation will be a binding constraint on all policies, including pensions. The Stability and Growth Pact (SGP) provides the framework for monitoring the sustainability of public finances, including pension systems17. Moreover, there could be further pressure for spending on care for the elderly should formal care increasingly replace informal care in the future. Reforms that enhance the EU's economic growth potential, e.g. by stimulating labour supply, are therefore particularly important. Higher labour productivity growth benefits all citizens, as it enables higher living standards. As regards fiscal sustainability, achieving higher employment rates in particular for older workers is even more important.

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Presidency conclusions of the 23 March 2005 COUNCIL OF THE EUROPEAN UNION 7619/1/05, REV 1, stressed the need "to safeguard the sustainability of public finances in the long run, to promote growth, and to avoid imposing excessive burdens on future generations." In relation to the SGP the Commission has proposed to also take account of implicit liabilities, notably related to ageing, amongst other factors to reflect future risks (COM(2010) 367/2).

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(1)

How can the EU support Member States' efforts to strengthen the adequacy of pension systems? Should the EU seek to define better what an adequate retirement income might entail? Is the existing pension framework at the EU level sufficient to ensure sustainable public finances? Achieving a sustainable balance between time spent in work and in retirement

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3.2.

Time spent in retirement has increased considerably over the past century and there are large variations between Member States. Currently, typically about one third of adult life is spent in retirement and this share will increase substantially with future gains in life expectancy18 unless the length of working life increases and people retire later. Less than 50% of people are still in employment by the age of 60. This goes against Member State commitments at the Barcelona European Council to postpone the age at which people stop working by five years19. It is also inconsistent with the objective of reaching the Europe 2020 75% employment rate target and impacts negatively on growth potential. The steep rise in old-age dependency ratios could be largely avoided if people would work longer (see figure 2). Without this a painful combination of lower benefits and higher contributions would be inevitable. Ensuring that the time spent in retirement does not continue to increase compared to time spent working would support adequacy and sustainability. This means increasing the age at which one stops working and draws a pension. Many Member States have already decided to raise the eligibility age for a full pension in their public pension schemes (see figure 6). There is a growing awareness that this represents an important signal to workers and employers, which motivates them to aim for higher effective retirement ages. A number of Member States have demonstrated that a promising policy option for strengthening the sustainability of pension systems is an automatic adjustment that increases the pensionable age in line with future gains in life expectancy. While this approach of contingent adjustments could be contemplated for other risks as well, committing to periodic reviews of the adequacy and sustainability of pensions could be an alternative or complementary way to facilitate a timely and smooth response to changing conditions many of which are hard to predict. The feasibility of universal pensionable ages has always been debated due to occupational differences in labour market entry ages and the health status of workers in different occupations. Most Member States address this challenge through resolute policies to improve health and safety at work while providing access to pathways for those in real need before the pensionable age. National efforts are underpinned by the European Health and Safety Strategy. A few Member States have acknowledged differences in entry ages by combining measures to increase pensionable ages with those increasing the number of contributory years required for a full pension. Furthermore, whilst taking measures to extend working lives, it will also be important to address issues such as gender gaps in both pay and the labour market. As labour market exit ages are still low, the question is whether common EU principles and pathways to adequate and sustainable pensions, applied in a differentiated manner, to cater for

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Chapter 3.2.1 of the Interim Joint Report on pensions, see footnote 2. Presidency conclusions of the 15-16 March 2002 EUROPEAN COUNCIL SN 100/1/02 REV 1.

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differences in pension systems, would be helpful? Such pathways would aim to enable people to build adequate entitlements whilst also making EU economies more sustainable. This requires pension system reforms to be supplemented with substantial efforts to allow workers to maintain their employability throughout their working lives, offering appropriate retraining opportunities. New technologies and services to provide flexible work arrangements through telework and upgrading of skills can help to accommodate older workers in the workplace for longer. Key measures enabling older workers, both women and men, to remain longer in the labour market would include access for all, irrespective of age, gender and ethnicity, to labour markets, to training and disability adjustments20. The European Social Fund supports measures to improve the employability and raise the employment rates of women and men of all working ages. The Commission is preparing a European Year on Active Ageing 2012 which should encourage Member States, social partners and other stakeholders to create better opportunities and working conditions for the participation of older workers in the labour market. This could involve adapting social and financial incentives to work, including Member States examining the role of their tax rules. Other measures could include adjusting age management, working arrangements and attitudes in labour markets and work-places, and considering conditions for older self-employed workers. Prolonging working lives to reflect continuous gains in life expectancy over time would bring a double dividend: higher living standards and more sustainable pensions. In order to achieve more sustainable and adequate pensions, it is important that workers, and very often younger ones, spend more time in jobs with wages and working hours entitling them to future pension rights. Member States are already taking measures to support longer working lives21. Health policies aimed at helping citizens age in better health can contribute to extending working lives, reduce pressure on pension systems and can improve sustainability22. Poor health is one of the drivers of early retirement. (3) How can higher effective retirement ages best be achieved and how could increases in pensionable ages contribute? Should automatic adjustment mechanisms related to demographic changes be introduced in pension systems in order to balance the time spent in work and in retirement? What role could the EU level play in this regard? How can the implementation of the Europe 2020 strategy be used to promote longer employment, its benefits to business and to address age discrimination in the labour market? Removing obstacles to mobility in the EU

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3.3.

Policies and regulation need to facilitate the free movement of production factors, notably labour and capital, so as to use resources efficiently and create favourable conditions to maximise incomes. Greater flexibility in job mobility supports the adjustment capacity of the

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economy and strengthens the European social model. Unleashing the full potential of the single market could bring significant benefits for all citizens23. 3.3.1. Strengthening the internal market for pensions

The adoption of the Directive on Institutions for Occupational Retirement Provision (IORP) in 2003 was a major achievement. But this Directive only covers those funded pensions that are occupational in nature and not even all occupational schemes fall under its scope (e.g. book reserve schemes are excluded). It is not a framework directive, which makes it difficult to adapt regulation to market changes. First experience has shown that there are still considerable barriers to cross-border activity. They prevent the full realisation of efficiency gains arising from scale economies and competition, thereby raising the cost of pensions and restricting consumer choice. Barriers are in many cases the result of regulatory differences and legal uncertainties, such as an unclear definition of cross-border activity, a lack of harmonisation of prudential regulation and complex interaction between EU regulation and national law. Removing these obstacles may require a review of the IORP Directive, further supervisory convergence and more transparency about national differences. Moreover, aspects concerning custodianship24 and pension fund governance need to be addressed, including an adequate understanding and supervision of investment decisions, remuneration, incentive structures for service providers and socially responsible investment (SRI). Appropriate and comparable accounting standards are important to enhancing transparency about pension liabilities. The International Accounting Standards Board (IASB) has undertaken a project to review its pension accounting standard IAS 1925. The European Commission jointly with its technical advisor, the European Financial Reporting Advisory Group (EFRAG), closely monitors the IASB project to improve pension accounting, possibly also for pension funds themselves, in accordance with the endorsement process established under the IAS Regulation26. The free movement of capital is facilitated by Member States giving the same tax treatment to dividends and interest received by IORPs investing in their territory but established elsewhere in the European Economic Area (EEA). Following the Commission's decision to launch infringement action against several Member States because of discriminatory features of their tax rules in this area, some Member States have already aligned their pension's tax legislation with the requirements of EU law. Although the Internal Market for insurance products has been in place for a longer time, cross-border activity for life assurance products has also remained limited, representing well below 10% of total life assurance premiums written in most Member States. The Internal Market could also be helpful in extending access to additional sources of retirement income beyond pensions, such as reverse mortgages. There have also been calls to create a regulatory

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See footnote 22 for more information on the current EU framework on pensions. See Commission report on some key aspects concerning Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision (IORP Directive) of 30.4.2009, COM(2009) 203, available at http://ec.europa.eu/internal_market/pensions/docs/legislation/iorp_report_en.pdf. IAS 19 Employee Benefits applies to the sponsoring undertakings. IAS Regulation 1606/2002.

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framework for an EU-wide private pension regime alongside the existing pension regimes in Europe27. (5) In which way should the IORP Directive be amended to improve the conditions for cross-border activity? Mobility of pensions

3.3.2.

EU Regulations on the coordination of social security systems have been protecting pension rights of mobile EU citizens and their family members for the past five decades. The new Regulations 883/2004 and 987/2009 expand this protection and ensure that for the accrual of pension rights, insurance periods acquired in another Member State will be taken into account. These Regulations are limited to statutory and occupational pension schemes where rights are based on legislation: recent national reforms as outlined above may thus require an extension of the coordination regulations and minimum standards to improve mobile workers' access to supplementary pension rights within and between Member States. The Commission proposed a Directive in 2005 to set minimum standards for the acquisition, preservation and transferability of supplementary pension rights. Internal mobility was included because a separation of internal and external mobility was impractical. The proposal was revised by the Commission in 2007 to drop the transferability element which had been opposed by some as technically difficult and potentially burdensome or open to abuse. This left the emphasis on the timely acquisition of pension rights and their subsequent preservation. However, it has still not been possible to achieve the unanimity needed in the Council to pass the Directive. Fresh impetus is needed to reach a solution for all mobile workers28. In today's labour market, with the added challenges from the financial and economic crisis, people need to be able to change jobs easily throughout their working life and employers should be able to recruit the right person with the right skills. Further need for action comes from the rise in the importance of funded pensions in diverse forms. This raises the issue of scope: e.g. should statutory mandatory funded schemes be included in EU measures? Some Member States operate pension tracing services which help people keep track of their pension rights from different sources within that Member State. Given the growing degree of labour mobility and reliance on a broader set of public and private sources of retirement income, an EU level tracking system could help mobile individuals keep track of their pension rights. Discriminatory tax rules can be an obstacle to the mobility of pensions. The Court of Justice has ruled that it is contrary to EU law to tax transfers of pension capital from domestic pension funds to funds established elsewhere in the EEA if transfers of pension capital

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between domestic pension funds are tax free29. The Commission intends to examine whether there are any other Member States with similar rules. (6) (7) What should be the scope of schemes covered by EU level action on removing obstacles for mobility? Should the EU look again at the issue of transfers or would minimum standards on acquisition and preservation plus a tracking service for all types of pension rights be a better solution? Safer, more transparent pensions with better awareness and information

3.4.

Safety in pensions is important to support adequacy. Moreover, the macroeconomic benefits can be felt quickly as pensioners are a growing source of stable and regular consumption. The disparate developments in Member States' pension systems and the trend towards DC schemes, however, raise new policy questions. 3.4.1. Closing gaps in EU regulation

As pension provision moves from single to multi-tiered systems and from simple to complex pension packages, the fragmented and incomplete character of the present European framework may no longer be sufficient. (1) Reforms have led to some funded pension schemes, both public and private, being covered by EU regulation in some Member States but not in others. This is not consistent with the relevant G20 Pittsburgh declaration (“13. […] All firms whose failure could pose a risk to financial stability must be subject to consistent, consolidated supervision and regulation with high standards. […]”), as reinforced at the G20 Toronto summit, nor does it reflect the fact that pension funds have become major players in financial markets. Similar pension schemes are covered by different EU rules thus raising issues of consistency. There are unclear boundaries between: social security schemes and private schemes; occupational and individual schemes; and voluntary and mandatory schemes. It is not always clear what differentiates general saving from pensions. This raises the question whether the label 'pension' should not be restricted to a product that has certain features such as security and rules restricting access including a payout design which incorporates a regular stream of payments in retirement.

(2) (3) (4)

Moreover, the trend towards DC schemes, away from defined benefit (DB) schemes, is continuing. The aim of tying employees to the company through occupational pension promises is losing ground: employers are less reliant on firm-specific skills due to technological advances and employees are increasingly preferring flexibility and mobility. Furthermore, while occupational DB schemes provide greater certainty about future retirement income and reduce costs because of their size and risk sharing, they can be an untenable burden on employers.
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Commission vs. Belgium, Case C-522/04.

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Today, nearly 60 million Europeans are enrolled in DC schemes30. Such schemes are much more prevalent today than they were a decade ago and will continue to grow in importance. The sponsor does not bear the financial risk and DC schemes are more likely to promote longer working lives. But a key implication is that they shift the investment, inflation and longevity risks to scheme members, who are less well placed to bear these risks individually. There are, however, ways to reduce these risks. Minimum return guarantees and life-styling portfolio compositions come at a cost but good practice across Member States has shown that they can reduce short-term volatility. Market performance can be enhanced by good economic and public finance policies and better regulation. Better investment practice and scheme design can substantially mitigate risk and increase capacity for shock absorption thus achieving a better balance between risks, security and affordability for both savers and providers. Collective risk sharing through hybrid schemes, such as a DC scheme with a minimum return guarantee or a part-DB and part-DC scheme, could change the current trend to individualised DC schemes. Moreover, high quality schemes are being promoted by industry initiatives. Some occupational DB schemes have also adapted to demographic and structural changes by increasing risk sharing between sponsors, workers and pensioners. Existing collective governance structures in DB schemes facilitate this. Examples include moving from final salary to career average schemes, establishing cash balance schemes, allowing for longevity adjustments, changing accrual rates, adjusting the normal pension age, and applying conditional indexation. International policy discussions raise the question whether current EU regulation is able to cope with the shift towards DC schemes31. A reassessment of the IORP Directive may be required in areas such as governance, risk management, safekeeping of assets, investment rules and disclosure. In addition, the current EU framework does not address the accumulation phase. This includes (i) plan design to mitigate short-term volatility in returns and (ii) investment choice and default investment options. Moreover, given that the size of the pension in DC schemes can depend on the year in which the pensioner retires, market regulation needs to address the payout phase such as rules on purchasing an annuity (e.g. whether it is mandatory or voluntary, and the timing). (8) Does current EU legislation need reviewing to ensure a consistent regulation and supervision of funded (i.e. backed by a fund of assets) pension schemes and products? If so, which elements? How could European regulation or a code of good practice help Member States achieve a better balance for pension savers and pension providers between risks, security and affordability? Improving the solvency regime for pension funds

(9)

3.4.2.

The IORP Directive's minimum prudential requirements include solvency rules for DB schemes. These solvency rules are currently the same as those that apply to life assurance undertakings. With the entry into force of the Solvency II Directive in 2012, insurance undertakings will be able to benefit from a three-pillar, risk-based solvency regime and the

30 31

EFRP survey on DC pensions 2010. OECD Pension Market in Focus Oct. 2009.

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question is whether this new regime should also apply to IORPs. There is little agreement among stakeholders, partly reflecting the difference in the ways occupational pensions are delivered: book reserve, pension fund or insurance contract. As regards pension funds, Member States have also taken different approaches to protecting acquired pension rights32. The Commission conducted a consultation on this subject in 2008 and organised a public hearing in May 2009. During this process, stakeholders signalled that there needs to be a sui generis solvency regime for pension funds and that it is important to avoid pro-cyclical solvency rules. The Solvency II approach could be a good starting point, subject to adjustments to take account of the nature and duration of the pension promise, where appropriate. The suitability of Solvency II for pension funds needs to be considered in a rigorous impact assessment, examining notably the influence on price and availability of pension products. A related question is whether, reflecting developments in banking, insurance and investment, there is a need for promoting pension benefit guarantee systems in the Member States, possibly coordinated or facilitated at EU level. Such systems can not only address failures in sponsor-backed DB schemes or book reserve schemes, but could also compensate for excessive losses in DC schemes. There are, however, important aspects to address such as moral hazard and potential implicit public support in very turbulent times. (10) 3.4.3. What should an equivalent solvency regime for pension funds look like? Addressing the risk of employer insolvency

Given the important role of sponsoring undertakings in the provision of benefits and the funding of IORPs, their insolvency presents a particular risk. The Insolvency Directive33 provides for the protection of employees’ rights to supplementary occupational pensions in the event of the insolvency of their employer. However, there is no obligation on the Member State to fund the rights nor do full guarantees need to be provided, thus leaving considerable latitude on the level and modalities of protection. Moreover, the IORP Directive does not apply to companies using book reserve schemes for the payment of retirement benefits to their employees. The need to ensure the protection of supplementary occupational pensions in those instances becomes more acute in the present situation, since the financial and economic crisis will increase the number of company insolvencies. The Commission presented a Staff Working Document34 on the implementation of the provision concerning supplementary occupational pensions contained in the Insolvency Directive. As a follow-up to this document, the Commission has launched a study in 200935 covering DB and book reserve schemes and is currently gathering information on the protection of unpaid contributions to DC schemes in case of employer insolvency. (11) Should the protection provided by EU legislation in the case of the insolvency of pension sponsoring employers be enhanced and if so how?

32

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Security mechanisms used today rely on a realistic valuation of technical provisions, own funds, sponsor covenants, pension protection funds or a combination of those elements (CEIOPS SSC report). 2008/94/EC SEC(2008) 475, 11.4.2008. OJ 2009/ S 230-329482.

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3.4.4.

Facilitating informed decisions

The trend towards DC schemes underlines the need for transparent and clear communication. The IORP and the Life Directives contain information disclosure requirements. But these provisions are based on minimum harmonisation and national approaches differ markedly. Moreover they were designed for DB schemes and may therefore need to be adjusted. In going forward, it would seem important to review the key information specifically for pension schemes and products (e.g. risk, nature of promise, cost/fees, payout method, etc.). This should take into account what is being developed for other financial products, seeking to ensure comparable information. Consumer testing combined with economic research could be used to improve the quality of information in terms of clarity and comparability. Shifting choice and responsibility to the individual requires that people understand the information in order to make informed choices, especially as pensions have become more complex. Financial education can help as demonstrated by the work of the OECD and the EU already works with Member States on this. Financial education complements regulation of the industry, both prudential (e.g. the IORP Directive) and market conduct rules, and product disclosure rules. It is important that individuals are properly equipped with economic literacy and planning skills to adequately assess their need for financial and social protection and to avoid behavioural biases. For example, with the growing importance of DC schemes people need to make informed decisions about investments. It is also important that people have a competent body to turn to that can answer their questions relating to pensions, especially in a cross-border mobility context. At the same time, national experiences suggest that the engagement rate that can be obtained through disclosure and financial education has an upper limit. It is therefore important to envisage an in-depth examination of the merits of auto-enrolment with opt-out clauses. Informed decisions go hand in hand with adequate pension provision. When making saving decisions it is important that individuals be offered appropriate options. There could therefore be a case for defining what exactly the desirable features of pensions are: if they lack certain key characteristics, not only could this lead to confusion, but it could also lead to under provision in retirement, for example if early withdrawals lead to a depletion of savings or if no steady income is generated from the accumulated assets. Member States may consider putting in place a reliable pensions advice service to facilitate consumer choices. (12) Is there a case for modernising the current minimum information disclosure requirements for pension products (e.g. in terms of comparability, standardisation and clarity)? Should the EU develop a common approach for default options about participation and investment choice? IMPROVING EU STATISTICS ON PENSIONS

(13)

4.

Data about pension systems available from the different national and EU-level sources could be streamlined to increase their comparability and make substantial cost savings. Building on existing international work (e.g. the OECD) and various EU initiatives, the development of an EU methodology for pension statistics could facilitate the assessment of the common policy and regulatory challenges. Pension funds are important institutional investors and their

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investment behaviour can affect financial stability. Citizens would benefit from the collection of accurate statistics about their retirement income from the different sources. Pensioners are set to grow as a group of consumers and firms would benefit from reliable and timely information about total disposable income. Furthermore, the monitoring of implicit liabilities could be strengthened to allow for a better assessment of the impact on the sustainability of public finances of pension schemes run by both public and private entities. 5. ENHANCING GOVERNANCE OF PENSION POLICY AT EU LEVEL

Europe must help address citizens' concerns about future pensions and revisit how a strategy can be defined to deliver adequate, sustainable and safe pensions, including through better use of EU instruments. Whilst Member States generally are responsible for the design and organisation of their pension systems, some specific areas relating to pensions fall directly within the EU's competencies. Member States have also recognised that acting together can be more effective and efficient and that the EU level can add value, not least since the challenges are similar across the EU and reform polices need to be consistent with existing frameworks such as the Stability and Growth Pact and Europe 2020. As part of this strategy, the EU contributes with measures such as surveillance, coordination and mutual learning. Examples include best practice sharing, peer reviews, agreeing objectives and indicators, and gathering comparable statistics. EU regulation covers social security coordination of public pensions, rules for occupational pension funds, portability and the protection of supplementary pension rights in the event of the insolvency of the employer, as well as rules for life assurance undertakings. If the EU is to offer appropriate support to national reform efforts, the framework of policy coordination must take an integrated approach to reflect the increasing complexity of pension systems. Moreover, given increasing economic and financial integration, the EU-level regulatory framework, as well as good coordination across the EU level policies and Member States' policies, is becoming ever more important. Pension policy is a common concern for public authorities, social partners, industry and civil society at national and at EU level. A common platform for monitoring all aspects of pension policy and regulation in an integrated manner and bringing together all stakeholders could contribute to achieving and maintaining adequate, sustainable and safe pensions. The Commission is therefore keen to explore how this can best be achieved in support of the EU's wider economic and social objectives. (14) Should the policy coordination framework at EU level be strengthened? If so, which elements need strengthening in order to improve the design and implementation of pension policy through an integrated approach? Would the creation of a platform for monitoring all aspects of pension policy in an integrated manner be part of the way forward?

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6.

HOW TO RESPOND TO THE CONSULTATION

The Commission invites all interested parties to respond to the questions set out in this Green Paper, together with any additional comments, by 15 November 2010 by means of the online questionnaire available at: http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=pensions. Alternatively, for those without web access, responses can be sent by post to: European Commission Directorate-General for Employment, Social Affairs & Equal Opportunities Green Paper on Pensions consultation Unit E4 rue Joseph II Office J-27 1/216 B - 1040 Brussels Please note, received contributions, together with the identity of the contributor, will be published on the Internet, unless the contributor objects to publication of the personal data on the grounds that such publication would harm his or her legitimate interests. In this case the contribution may be published in anonymous form. Otherwise the contribution will not be published nor will, in principle, its content be taken into account.

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GLOSSARY AND STATISTICAL ANNEX 1. GLOSSARY

Accumulation phase – Period during which contributions are made and invested in a defined contribution scheme. (See also: Defined contribution (DC) schemes). Accrual rate – Rate at which future pension benefits are built up. It is used in defined benefit schemes and based on the formula linked to the scheme. For example, a pension accrual rate could be 1.5% of final pensionable salary for each year of pensionable service (See also: Defined benefit (DB) schemes). Annuity – A financial contract, sold by a life insurance company for example, that guarantees a fixed or variable payment of income benefit (monthly, quarterly, half-yearly, or yearly) for the life of a person(s) (the annuitant) or for a specified period of time. It differs from a life insurance contract which provides an income to the beneficiary after the death of the insured. An annuity may be bought on instalments or by paying a single lump sum. Benefits may start immediately or at a pre-defined time in the future or at a specific age. An annuity is one way of securing a regular retirement income for individuals who have saved in a defined contribution scheme. (See also: Defined contribution (DC) schemes). Automatic (or auto-) enrolment – Generally refers to employees being members of their employer's pension scheme as a default choice, with the possibility of opting out on request. Automatic adjustment mechanisms – Generally refers means of adjusting benefits, rights and/or contribution levels to changing circumstances, e.g. economic conditions, financial market returns or longevity assumptions. Book reserve pension scheme – A method of accounting used by some sponsoring employers to finance pension promises. Sums are entered in the balance sheet of the scheme sponsor as reserves or provisions for scheme benefits. Some assets may be held in separate accounts for the purpose of financing benefits, but they are not legally or contractually pension plan assets. (See also: Defined benefit (DB) schemes). Career average scheme – A defined benefit scheme where the future pension benefit earned for a specific year depends on the level of the member's earnings for the given year. (See also: Defined benefit (DB) schemes). Cash balance schemes – A scheme where the employer guarantees a pension pot to scheme members, payable at the normal pension age, with which they can purchase an annuity. (See also: Normal pension age; Annuity). Conditional indexation – Refers to defined benefit schemes where the provision of indexed benefits (generally revalued to inflation or wages) is conditional on the financial performance of the scheme's investments. (See also: Defined benefit (DB) schemes). Defined benefit (DB) schemes – Pension schemes where the benefits accrued are linked to earnings and the employment career (the future pension benefit is pre-defined and promised to the member). It is normally the scheme sponsor who bears the investment risk and often also the longevity risk: if assumptions about rates of return or life expectancy are not met, the

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sponsor must increase its contributions to pay the promised pension. These tend to be occupational schemes. (See also: Defined contribution (DC) schemes). Defined contribution (DC) schemes – Pension schemes where the level of contributions, and not the final benefit, is pre-defined: no final pension promise is made. DC schemes can be public, occupational or personal: contributions can be made by the individual, the employer and/or the state, depending on scheme rules. The pension level will depend on the performance of the chosen investment strategy and the level of contributions. The individual member therefore bears the investment risk and often makes decisions about how to mitigate this risk. (See also: Defined benefit (DB) schemes). Effective retirement age – Age at which an individual actually retires. Not necessarily the same as the labour market exit age or normal retirement age. (See also: Labour market exit age, and Normal pension age). Equity Release Scheme – Term used to describe both the process and the products that allow homeowners to secure substantial lump sums or regular income payments by realising part of the value of their homes, while being able to continue to live in it. Final salary scheme – A defined benefit scheme where the pension benefit is typically based on the last or the last few years' of earnings before retirement. (See also: Defined benefit (DB) schemes). Funded scheme – A pension scheme whose benefit promises are backed by a fund of assets set aside and invested for the purpose of meeting the scheme's liability for benefit payments as they arise. Funded schemes can be either collective or individual. (See also: Pay-As-YouGo schemes). Governance (of pension funds) - The operation and oversight of a pension fund. The governing body is responsible for administration, but may employ other specialists, such as actuaries, custodians, consultants, asset managers and advisers to carry out specific operational tasks or to advise the scheme administration or governing body. Hybrid pension scheme – In a hybrid scheme, elements of both defined contribution and defined benefits are present or, more generally, the risk is shared by the scheme's operator and beneficiaries. Individual pension scheme - Access to these schemes does not depend on an employment relationship. The schemes are set up and administered directly by a pension fund or a financial institution acting as pension provider without the involvement of employers. Individuals independently purchase and select material aspects of the arrangements. The employer may nonetheless make contributions to individual pension schemes. Some schemes may have restricted membership. Information disclosure regulations – The rules prescribing the periodicity, procedure, type and extent of information to be provided to members of pension plans and/or the supervisory authority. Institutional investor - Generally refers to a group of investors such as pension funds, insurance companies, investment funds and, in some cases, banks.

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Labour market exit age - Age at which an individual actually leaves the labour market. For data availability reasons labour market exit age is often used as a proxy for the effective retirement age. Differences between the two may exist, as some people leave the labour market before they actually retire while others continue working after retirement. (See also: Effective retirement age). Lifestyling or life-cycling strategies – Investment strategies used in defined contribution pension schemes to reduce investment risk and volatility by gradually and automatically reducing the investment risk taken by the scheme member as they approach retirement. (See also: Defined contribution (DC) schemes). Minimum return guarantees – Minimum level of pension benefit paid out regardless of investment performance in a defined contribution scheme. Normal pension age – Age at which a member of the pension scheme is eligible to receive full pension benefits. Occupational schemes – A pension plan where access is linked to an employment or professional relationship between the plan member and the entity that sets up the plan (the plan sponsor). Occupational pension schemes may be established by employers or groups of employers (e.g. industry associations) or labour or professional associations, jointly or separately, or by self-employed persons. The scheme may be administered directly by the sponsor or by an independent entity (a pension fund or a financial institution acting as pension provider). In the latter case, the sponsor may still have responsibility for overseeing the operation of the scheme. Old-age dependency ratio – Population aged over 65 as a percentage of the working age population (usually defined as persons aged between 15 and 64). Operational risk - The risk of loss arising from inadequate or failed internal processes, personnel or systems, or from external events. Own funds (regulatory) – Refers to the additional assets of a pension funds above its technical provisions serving as a buffer. Regulation usually requires that these assets are free of all foreseeable liabilities and serve as a safety capital to absorb discrepancies between anticipated and actual expenditure and profits. Also referred to as regulatory capital. (See also: Technical provisions). Pay-As-You-Go (PAYG) schemes – Pension schemes where current contributions finance current pension expenditure (See also: funded schemes). Payout phase or decumulation phase – Period during which assets accrued in the accumulation phase are paid out to the pension scheme member in a funded scheme. An example of a payout phase is a period in which regular retirement income is received through the purchase of an annuity. (See also: Annuity). Pension benefit guarantee system – An arrangement to pay compensation to members or beneficiaries of pension schemes in the event of insolvency of to the pension fund and/or sponsoring employer. Examples of a pension benefit guarantee systems include the PensionsSicherungs-Verein Versicherungsverein auf Gegenseitigkeit (PSVaG) in Germany and the Pension Protection Fund in the UK.

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Pension pillar – Different types of pension schemes are usually grouped into two, three, four or more pillars of the pension system. There is however no universally agreed classification. Many pension systems distinguish between statutory, occupational and individual pension schemes, or between mandatory and voluntary pension schemes. Participation in occupational and individual pension schemes, usually private pension arrangements, can be mandatory or voluntary. Replacement rate – Generally refers to an indicator showing the level of pension income after retirement as a percentage of individual earnings at the moment of take-up of pensions or of average earnings. Replacement rates measure the extent to which pension systems enable typical workers to preserve their previous living standard when moving from employment to retirement. Solvency – The ability of a pension scheme's assets to meet the scheme's liabilities. The scheme's liabilities cover all future pension payments and must therefore be discounted well into the future, thus making substantial assumptions about longevity. The value of a scheme's assets is dependent on the type of accounting standard used. If a scheme is not deemed to have a sufficiently high solvency level, it needs to consider whether to increase contribution levels or reduce entitlements, where scheme rules permit. Sponsor covenant - Refers to a sponsoring employer’s ability to support pension fund volatility by providing additional funding if required. The 'covenant' in this context is a very similar concept to 'creditworthiness' for borrowers. At a simple level, if a pension fund has a deficit then it is in many respects similar to a bond holder in financial market terms. It depends on the ability of the company to pay additional contributions in the future if investment returns are not sufficient to make up the shortfall. Statutory pension scheme - Social security and similar statutory programmes administered by the general government (that is central, state, and local governments, plus other public sector bodies such as social security institutions). Public pension plans have traditionally been of the PAYG type. Supplementary pension schemes –Mandatory or voluntary pension schemes which generally provide additional retirement income to the statutory pension scheme. Technical provisions – The amount of liabilities corresponding to the financial commitments of a pension fund which arise out of its portfolio of existing pension contracts. See also Article 15 of Directive 2003/41/EC. Transferability – The right to transfer accrued benefits or accumulated capital from one pension scheme to another, for example to the pension scheme of the new employer.

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2.

STATISTICAL ANNEX

Figure 1: Demographic structure of the population in 2008 and 2060 Figure 2: Old-age dependency ratios under different average exit age scenarios Figure 3: Change in public pension expenditure as a share of GDP over 2007-60 (in percentage points) Figure 4: Benefit ratios in EU Member States in 2007 and 2060 Figure 5: Change in theoretical replacement rates for an average wage earner retiring at 65 after 40 years career between 2006 and 2046 in percentage points Figure 6: Standard pension eligibility age and average labour market exit age in EU-27 Figure 7: Overall, female and older workers employment rates in EU-27, 2000-2008, in percent Figure 8: Pension benefit impact of shorter and longer working lives Figure 9: Pension benefit impact of career breaks due to unemployment Figure 10: Increasing significance of funded pensions

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Figure 1: Demographic structure of the population in 2008 and 2060 2008

2060

Source: Commission services, graph published in the 2010 Interim Joint Report on pensions of the Economic Policy Committee and Social Protection Committee, noted by the 7-8 June 2010 EPSCO and ECOFIN Councils, p. 9, available at: http://europa.eu/epc/publications/index_en.htm. Note: the red (dark) bar indicates the most numerous cohort.

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Figure 2: Old-age dependency ratios under different average exit age scenarios In 2010, when it is assumed that people leave the labour market on average at age 60, the dependency ratio, i.e. the number of people of working age relative to the number of people above age 60, amounts to 5 to 2. If by 2040 people were to remain until 67 the corresponding ratio would stay constant and the increase by 2060 would far less dramatic than at lower exit ages. There would be no increase if the exit age would increase another 3 years between 2040 and 2060.
EU-27 old-age dependency ratios, 2010-2060, under four exit assumptions (working ages from 20 to 59 through 69)
20 to 59 / 60+ 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2010 2020 2030 2040 2050 2060 20 to 63 / 64+ 20 to 66 / 67+ 20 to 69 / 70+

Source: Eurostat, Population Projections, 2008 data.

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Figure 3: Change in public pension expenditure as a share of GDP over 2007-60 (in percentage points)
LU EL CY RO SI ES MT BE NO IE LT NL SK FI CZ BG EA16 UK EU27 DE PT FR AT DK SE LV HU IT EE PL -8 -6 -4 -2 0 2 4 6 8 10 12 14 16

Social Security Pension /GDP

Source: Ageing report 2009, available at: http://ec.europa.eu/economy_finance/publications/publication13782_en.pdf, data as updated at the Ageing Working Group in 2010. Note: Hungary reformed its pension system in 2009. Following the reform, its impact was assessed through a peer review by the AWG, and endorsed by the EPC at their 22 February 2010 meeting. According to the revised pension projections, public pension expenditure is projected to decrease from 10.9% of GDP in 2007 to 10.5% of GDP in 2060, i.e. by 0.4 p.p. of GDP, compared with the projection in the 2009 Ageing Report, where an increase of 3 p.p. of GDP between 2007 and 2060 was projected.

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Figure 4: Benefit ratios in EU Member States in 2007 and 2060
Benefit Ratio (%) Public pensions Public and private pensions 2007 2060 % change 2007 2060 % change 45 43 -4 44 36 -20 44 41 -8 45 38 -17 39 38 -4 64 75 17 51 42 -17 26 16 -40 26 22 -18 27 32 16 73 80 10 58 52 -10 62 57 -8 63 48 -25 68 47 -31 54 57 5 24 13 -47 24 25 4 33 28 -16 33 32 -2 46 44 -4 46 44 -4 39 36 -8 39 38 -3 42 40 -6 44 41 -7 74 81 10 55 39 -30 56 26 -54 56 31 -44 46 33 -29 47 33 -31 29 37 26 29 41 41 41 39 -6 41 40 -2 45 33 -27 45 40 -11 49 47 -5 49 30 -39 64 46 -27 35 37 7 51 47 -8

BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK NO

Source: Ageing report 2009, available at: http://ec.europa.eu/economy_finance/publications/publication13782_en.pdf. Note: The 'Benefit ratio' is the average benefit of public pension and public and private pensions, respectively, as a share of the economy-wide average wage (gross wages and salaries in relation to employees), as calculated by the Commission. Public pensions used to calculate the Benefit Ratio includes old-age and early pensions and other pensions. Private pensions are not included for all Member States. Hence, the comparability of the figures is limited. The value of indicators might change as some Member States consider reforms of their pension systems (e.g. Ireland).

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Figure 5: Change in theoretical replacement rates for an average wage earner retiring at 65 after 40 years career between 2006 and 2046 in percentage points

Change in TRR in pp, 2006-2046
55 45 35 25 15 5 -5 -15 -25 MT IT PT CZ FR AT LT IE FI LU SI HU EL PL NL BG RO SK BE SE ES EE LV UK DE DK CY

Net RR

Gross RR

Source: INDICATORS' SUBGROUP OF THE SOCIAL PROTECTION COMMITTEE (ISG) 2009 report on Theoretical Replacement Rates, "UPDATES OF CURRENT AND PROSPECTIVE THEORETICAL PENSION REPLACEMENT RATES 2006-2046", p.17, available at: http://ec.europa.eu/social/main.jsp?catId=752&langId=en&moreDocuments=yes. Note: Replacement rates are defined as the level of pension income during the first year of retirement as a percentage of individual earnings immediately before retirement. For countries with a projected drop in replacement rates it should be noted that the decrease can usually be counterbalanced by working longer. It should be noted that EE, like other countries with a more positive evolutions in replacement rates (RO, BG and CY), start off from rather low initial levels of the rates.

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Figure 6: Standard pension eligibility age and average labour market exit age in EU-27 There has been a more or less pronounced increase in the average exit age from the labour force of nearly all Member States between 2001 and 2008, with an EU27 average exit age of 61.4 years in 2008. For those countries with increasing pensionable ages until 2020 and beyond, the average exit age is expected to continue to increase. It appears that most countries are gradually moving to a universal pensionable age of at least 65, but countries such as DK, DE and UK have already legislated further increases in order to respond to continued advances in longevity.

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Average exit age Average exit age from Statutory retirement Member State from the labour force the labour force in age for M/W in 2009 in 2001 2008

Statutory retirement age for M/W in 2020

Further increases in the statutory retirement age for M/W after 2020

Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden United Kingdom EU 27 average

56.8 58.4 58.9 61.6 60.6 61.1 63.2 61.3° 60.3 58.1 59.8 62.3 62.4 58.9 56.8 57.6 57.6 60.9 59.2 56.6 61.9 59.8 56.6° 57.5 61.4 62.1 62.0 59.9

61.6* 61.5 60.6 61.3 61.7 62.1 64.1** 61.4 62.6 59.3 60.8 63.5* 62.7 59.9** : : 59.8 63.2 60.9* 59.3* 62.6* 55.5 59.8** 58.7* 61.6* 63.8 63.1 61.4

65/65 63/60 62/60y8m 65/65 65/65 63/61 65/65 65/60 65/65 60-65 65/60 65/65 62/62 62y6m/60 65/65 62/62 61/60 65/65 65/60 65/60 65/65 63y8m/58y8m 63/61 62/59 65/65, 63-68 61-67 65/60

65/65 63/60 63y8m/63y4m 65/65 65y9m/65y9m 63/63 65/65 (66/66) 65/60 65/65 60/60 65/60**** 65/65 62/62 64/63 65/65 64/64 63/63 65/65 (66/66) 65/60 65/60 65/65 65/60 (65/61y11m) 63/61 (65/65) 62/62 65/65, 63-68 61-67 65/65 68/68 (65/65) 65/65 65/65 (67/67) 65/65 65/65 *** (68/68) 65/65 65/65 67+/67+*** 67/67

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Source: Eurostat, MISSOC, Ageing Report, 2010 Interim Joint Report on pensions of the Economic Policy Committee and Social Protection Committee, noted by the 7-8 June 2010 EPSCO and ECOFIN Councils, available at: http://europa.eu/epc/publications/index_en.htm.
Note: ° - 2002, * - 2007, ** - 2006, in brackets – proposed, not yet legislated, *** retirement age evolves in line with life expectancy gains over time, introducing flexibility in the retirement provision. **** For Italy 65/65 for civil servants, starting from 2018. Sweden: guarantee pension is available from the age of 65. Romania: the National House of Pensions and other Social Insurance Rights.

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Figure 7: Overall, female and older workers employment rates in EU-27, 2000-2008, in percent

Overall, female and older workers employment rates in EU-27 2000-2008 in %
70 % of respective age population 65 60 55 50 45 40 35 30 2000 2001 2002 2003 2004 2005 2006 2007 2008

Total 15-64

Females 15-64

Total 55-64

Source: Eurostat, LFS annual data, graph published in the 2010 Interim Joint Report on pensions of the Economic Policy Committee and Social Protection Committee, noted by the 7-8 June 2010 EPSCO and ECOFIN Councils, p.10, available at: http://europa.eu/epc/publications/index_en.htm.

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Figure 8: Pension benefit impact of shorter and longer working lives

Difference in Net TRR percentage points for an average earner working until the age of 63 or 67 (ie 38 or 42 contributory years) compared with working until 65 (ie 40 years career - basecase). Prospective Calculations, 2046

16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 -2,0 -4,0 -6,0 -8,0 -10,0 -12,0 -14,0 HU IE UK LU FI SI NL IT RO MT AT CZ ES BE SE EE DK DE SK LV BG CY FR EL PL PT LT

Difference in Net TRR after a 38 year career compared with a 40 year career Difference in Net TRR after a 42 year career compared with a 40 year career

Source: INDICATORS' SUBGROUP OF THE SOCIAL PROTECTION COMMITTEE (ISG) 2009 report on Theoretical Replacement Rates (TRR), "UPDATES OF CURRENT AND PROSPECTIVE THEORETICAL PENSION REPLACEMENT RATES 2006-2046", p.22, available at: http://ec.europa.eu/social/main.jsp?catId=752&langId=en&moreDocuments=yes.

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Figure 9: Pension benefit impact of career breaks due to unemployment

Accumulated difference in net theoretical replacement rates for an average earner entering the labour market at 25 and retiring at the statutory retirement age with a 1, 2 or 3 year career break due to unemployment compared with no break*

2 1 0 -1 -2 -3 -4 -5 -6 -7 FR HU DK BG ES IE EL NL LT PT CZ AT MT

EE

BE

UK

DE

1 year

2 years

3 years

Source: SOCIAL PROTECTION COMMITTEE/INDICATORS' SUBGROUP OF THE SOCIAL PROTECTION COMMITTEE (ISG). Graph published in the 2010 Interim Joint Report on pensions of the Economic Policy Committee and Social Protection Committee, noted by the 7-8 June 2010 EPSCO and ECOFIN Councils, p.50, available at: http://europa.eu/epc/publications/index_en.htm

*The unemployment break is assumed to take place in the years just prior to old age retirement which is assumed here to be the statutory retirement age for men Note: the values for MT and PT are equal to 0 and should not be interpreted as missing. The values are validated by Member States. Conditions of crediting unemployment breaks might have a positive impact on the replacement rate of a hypothetical worker in the base-case scenario, for whom values in the Figure are provided.

EN

RO

SE

LU

CY

LV

SK

SI

PL

IT

FI

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Figure 10: Increasing significance of funded pensions

This figure shows that for most of those countries represented, funded pensions will provide for a larger share of retirement income in 2046 than in 2006 as a result of pension reforms (measured by gross theoretical replacement rates). Share of occupational and statutory funded pensions in total gross theoretical replacement rates in 2006 and 2046 in selected Member States

70%

60%

2046

2006

50%

40%

30%

20%

10%

0% IT RO BG BE DE HU SE EE LT UK PL SK IE LV DK NL

Source: INDICATORS' SUBGROUP OF THE SOCIAL PROTECTION COMMITTEE (ISG) 2009 report on Theoretical Replacement Rates, "UPDATES OF CURRENT AND PROSPECTIVE THEORETICAL PENSION REPLACEMENT RATES 2006-2046", Annex – country fiches, available at: http://ec.europa.eu/social/main.jsp?catId=752&langId=en&moreDocuments=yes.

Note: Data available only for a number of Member States

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EUROPEAN COMMISSION

Brussels, 7.7.2010 SEC(2010) 830 final

COMMISSION STAFF WORKING DOCUMENT EU LEGISLATION, COVERAGE AND RELATED INITIATIVES

Accompanying document to the

GREEN PAPER towards adequate, sustainable and safe European pension systems

{COM(2010) 365 final}

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TABLE OF CONTENTS
1. 1.1. 1.2. 1.3. 1.4. Description of EU legislation covering the pension pillars ......................................... 3 Social Security Regulation........................................................................................... 3 The IORP Directive...................................................................................................... 4 The Insolvency Directive ............................................................................................. 4 The existing Directive on safeguarding supplementary pension rights of a person moving within the EU and the draft proposal on portability of supplementary pension rights............................................................................................................................. 4 The Life Assurance Directive ...................................................................................... 5 Related EU legislation and initiatives .......................................................................... 5 UCITS IV Directive ..................................................................................................... 5 Pre-contractual information disclosure ........................................................................ 6 Financial education ...................................................................................................... 6 Corporate Governance and remuneration policies....................................................... 7 Non-life Insurance Directive (health) .......................................................................... 7 Health policy ................................................................................................................ 7 The Gender Equality Directives................................................................................... 8 Taxation........................................................................................................................ 8 Statistics ....................................................................................................................... 9 EU-wide reviews.......................................................................................................... 9 CEIOPS mapping of EU prudential regulation.......................................................... 10 Statutory funded pension schemes/institutions .......................................................... 11 Occupational pension schemes/institutions................................................................ 11 Individual pension schemes/institutions .................................................................... 12

1.5. 2. 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. 2.10. 3. 3.1. 3.2. 3.3.

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This document describes EU legislation covering the pension pillars (section 1) and related EU legislation and initiatives (section 2). A mapping of the EU legislation applicable to pension schemes/institutions in the different EU Member States is provided in section 3. This mapping focuses in particular on prudential regulation and was carried out by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). 1. 1.1. DESCRIPTION OF EU LEGISLATION COVERING THE PENSION PILLARS Social Security Regulation

EU law in the field of social security provides for the co-ordination but not the harmonisation of social security schemes. This means that each Member State is free to determine the details of its own social security system, including which benefits are to be provided, the conditions of eligibility, how these benefits are calculated and what level of contributions should be paid. EU law provisions, in particular Regulations No 883/20041 and No 987/20092 (replacing Regulations No 1408/713 and No 574/724 since 1 May 2010), establish common rules and principles which must be observed by all national authorities when applying national law. These rules ensure that the application of the different national legislations respects the basic principles of equality of treatment and non-discrimination and persons exercising their right to free movement within the EU are not adversely affected by the application of different national legislations. With regard to pensions, the EU Coordination Regulations cover old-age pensions, survivors' pensions and invalidity pensions. In general, only statutory schemes are coordinated. The EU Coordination rules lay down for the following principles: – Aggregation: periods of insurance or residence completed under the legislation of another Member State are taken into account if necessary for entitlement to a benefit; – Waiving of residence clauses: entitlement to a pension does not depend on residence in the Member State granting the pension; – Each Member State where a person was insured for at least one year pays a pension; there is no 'transfer' of pension rights to the pension system of another Member State.

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Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (Text with relevance for the EEA and for Switzerland), OJ L 166, 30.4.2004, p. 1–123 Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems. Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community Council Regulation (EEC) No 574/72 of 21 March 1972 fixing the procedure for implementing Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community

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1.2.

The IORP Directive

A major milestone was reached in 2003 with the adoption of Directive 2003/41/EC5 on the activities and supervision of institutions for occupational retirement provision (IORP Directive). It enables pension funds to benefit from the Internal Market principles of free movement of capital and freedom to provide services. The Directive allows pension funds to manage occupational pension schemes for companies that are established in another Member State and allows European-wide companies to have only one pension fund for all subsidiaries in Europe. The Directive establishes prudential standards to ensure that members and beneficiaries are properly protected, as well as requirements concerning the disclosure of information. The Directive is, however, based on minimum harmonisation and mutual recognition and it does not cover all forms of occupational pension provision. 1.3. The Insolvency Directive

Directive 2008/94/EC6 provides for the protection of employees’ rights in the event of the insolvency of their employer, in particular in order to guarantee payment of their outstanding claims. As far as supplementary occupational pensions are concerned, Article 8 requires Member States to adopt the necessary measures to protect these pensions. The European Court of Justice has ruled7 that the Directive places no obligation on the Member States themselves to fund the rights to old-age benefits. Furthermore the Court took the view that the Directive cannot be interpreted as demanding a full guarantee of the rights in question. The Directive does no more than call, in general terms, for adoption of the measures necessary to “protect the interests” of the persons concerned, while leaving the Member States considerable latitude as regards the level of protection and ruling out any obligation to provide a full guarantee. At the same time, the Court considered that a system which may, in certain cases, lead to a guarantee of benefits of less than half of that entitlement, cannot be deemed to fall within the definition of “protect” as applied in the Directive. 1.4. The existing Directive on safeguarding supplementary pension rights of a person moving within the EU and the draft proposal on portability of supplementary pension rights

Unlike with social security pensions which are aggregated under EU rules, people who have supplementary pension rights may lose out when they change jobs within or between countries. A first step to tackle this issue was Council Directive 98/49/EC8, which effectively ensured that people moving across borders were treated no worse than those moving within a Member State. The Directive does not cover, however, what is often called the "portability" of supplementary pensions even though this may have a serious effect on worker mobility. The Commission has recognised that insufficient portability of supplementary pension rights can create important obstacles to workers' mobility, and therefore to the free movement of

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Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision, OJ L 235 , 23/09/2003 P. 0010 – 0021. Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 on the protection of employees in the event of the insolvency of their employer OJ L 283, 28.10.2008, p. 36 Judgment of the Court of 25 January 2007 (Carol Marilyn Robins and others v Secretary of State for Work and Pensions). C-278/05. ECR 2007 Page I-01053 Council Directive 98/49/EC of 29 June 1998 on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community, OJ L 209, 25.7.1998, p. 46–49.

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workers which is one of the basic rights enshrined in the Treaty. The Commission proposed a new Directive in October 2005 to set minimum standards for the acquisition, preservation and transferability of supplementary pension rights. These standards would apply to people moving both within and between EU countries. Internal mobility was included because it was impractical to separate internal and external mobility. In addition, labour mobility was key to promoting economic dynamism and labour market adjustment, as set out in the Lisbon Strategy. The proposal was revised by the Commission in 2007 to omit the transferability element which had been opposed by some as technically difficult and potentially burdensome or open to abuse. As a result, the emphasis was laid on the timely acquisition of pension rights and their subsequent preservation (indexation). However, it has still not been possible to reach the unanimous agreement needed in Council. The proposal remains 'live'. 1.5. The Life Assurance Directive

The internal market in the field of life assurance, allowing insurance undertakings to operate throughout the EU and to establish and provide services freely, was initiated in 1979 with the adoption of the First Life Directive.9 The subsequent improvements to the legal framework were recast in 2002 into a single text (Directive 2002/83/EC10). The prudential rules applicable to life assurance undertakings were substantially overhauled in 2009 with the adoption of the Solvency II Directive (Directive 2009/138/EC11). The harmonisation of insurance regulation will give a new impetus to the internal market for life assurance products through greater economic efficiency and stronger protection of policy holders. It was, however, not the objective of the Solvency II Directive to modernise the policyholder information requirements, which continue to differ significantly across Member States. 2. 2.1. RELATED EU LEGISLATION AND INITIATIVES UCITS IV Directive

The UCITS Directive12 contains the regulatory framework for retail funds at the European level and lays the basis for a single market in these funds. UCITS IV changes were adopted in 2009 to address a number of efficiency concerns, investor protection issues, and practical problems that have been identified in relation to the UCITS industry, the combination of which was considered to be limiting the development of the UCITS market. More specifically, changes were made, for example, in the areas of governance and risk management. The UCITS IV Directive contains changes that enhance the effectiveness of the management company passport, in particular by providing for safeguards that foster

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First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, OJ L 63, 13.3.1979, p. 1–18. Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance, OJ L 345, 19.12.2002, p. 1–51. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Text with EEA relevance), OJ L 335, 17.12.2009, p. 1–155.
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), OJ L 302, 17.11.2009, p. 32–96.

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supervisory cooperation and mutual confidence. To ensure this confidence, the Commission is due to adopt Level 2 implementing measures by the end of June 2010 that will harmonise certain attributes of management companies business (in particular organisational arrangements including rules of conduct, conflicts of interest but also risk management and measurement). As a result, once the management company is approved in one Member State it will be subject to a harmonised set of standards across the EU. 2.2. Pre-contractual information disclosure

There are several examples of testing of pre-contractual information for financial services, both at EU and national level. At the EU level, the Commission asked OPTEM and its partners in the 27 Member States to carry out a qualitative study among consumers on the subject of pre-contractual information for diverse types of financial products, including consumer credit, mortgage loans and investment services. A summary report was made available in January 2008.13 The UCITS IV Directive requires UCITS to provide a Key Investor Information (KII) sheet in a harmonised and standardised form to the investor. On the basis of a consumer testing that fed into advice from the Committee of European Securities Regulators (CESR), the Commission will adopt Level 2 implementing measures by the end of June 2010. The results of the testing underlined the difficulty faced by retail investors in effectively engaging with and using information about investment products. It showed that key information on risks, costs and performance was calculated and presented inconsistently or in such a way that it was difficult to use, and detailed content or presentation of information was not standardised. The Level 2 implementing measures are to ensure that the communication and presentation of Key Investor Information to individuals is visual, simple, and facilitates comparisons across funds. The Commission announced in its Communication of 30 April 2009 on Packaged Retail Investment Products (PRIPs)14 its commitment to introduce a new horizontal approach to the regulation of sales and pre-contractual disclosures for these products, so as to ensure a level playing field between different types of investment products offered in the retail market. The aim is to ensure that consumer protection measures are effective and appropriate. Following the Communication, the Commission will focus on developing specific legislative proposals for this new horizontal approach, possibly in Spring 2011. The PRIPs proposals will be subject to their own impact assessment, which will consider their incremental impact for all stakeholders. 2.3. Financial education

The best way to increase the financial capability of consumers in the Internal Market is by developing coordinated strategies in individual Member States. The role of the Commission is to encourage the Member States to tackle financial education issues and to facilitate an exchange of best practices. The Commission has taken initiatives to organise expert meetings, maintain a European database, develop on-line tools for teachers and support events through patronage.

13

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Pre-contractual information for financial services, January 2008, available at http://ec.europa.eu/consumers/rights/docs/PCI_final_report_22Feb2008_en.pdf Communication from the Commission on Packaged Retail Investment Products, 30.4.2009, COM(2009) 204 final

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2.4.

Corporate Governance and remuneration policies

Following an announcement in the Commission Communication "Driving European Recovery" of March 2009, the Commission adopted a Green Paper on 2 June 201015 in order to launch a consultation process on possible (legislative and non-legislative) EU measures in the area of Corporate Governance in financial institutions. The Green Paper addresses, among others, the role of boards, shareholders, supervisors and external auditors in ensuring good corporate governance, governance of the risk management process and remuneration policies. The Green Paper states that corporate governance should take account of the interests of other stakeholders (depositors, savers, life insurance policy holders, etc), as well as the stability of the financial system, due to the systemic nature of many players. A fortiori, these considerations are relevant for pension funds, considering their economic importance and their growing role in the society. Furthermore, the Commission intends to consult, in a second stage, on possible measures in Corporate Governance for all listed companies early in 2011. 2.5. Non-life Insurance Directive (health)

The First Non-life Insurance Directive (Directive 73/239/EEC16) specifies that health insurance constitutes insurance business. Accordingly, supplementary private health insurance (insurance which provides for health cover which is already covered by the statutory social security system), complementary private health insurance (insurance which provides for additional health cover which is outside the scope of the statutory social security) and substitutive health insurance (insurance serving as a partial or total alternative to health cover provided by the statutory social security system) are subject to the Non-life Insurance Directives. The first Non-life Insurance Directive excludes from the scope of the application of the non-life insurance directives "insurance forming part of a statutory system of social security." The same applies to long-term care insurance. 2.6. Health policy

The state of people's health makes a significant difference between being able to work or not and therefore impacts on retirement age and expenditure on pensions. National healthcare reforms aimed at helping citizens to age in good health as well as EU action to promote healthy ageing (as foreseen in the EU Health Strategy White Paper) can therefore contribute to achieving the Europe 2020 objectives of retaining citizens longer on the labour market. A population ageing in bad health means a smaller workforce with many people unable to work because of health problems, lower retirement age and therefore greater spending on pensions. A population ageing in good health can continue working as it grows older thus

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Green Paper on Corporate governance in financial institutions and remuneration policies, COM(2010) 284, available at: http://ec.europa.eu/internal_market/company/modern/corporate_governance_in_financial_institutions_e n.htm First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, OJ L 228 , 16/08/1973 P. 0003 – 0019.

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contributing to rising retirement age and lowering spending on pensions. Citizens in good health retire about two years later than workers in poor health.17 2.7. The Gender Equality Directives

Three Gender Equality Directives have an impact on pension schemes. Directive 79/7/EEC18 implements the principle of equal treatment between men and women in matters of social security and notably covers statutory pensions. It however contains a number of exceptions to the principle of equal treatment. Member States are, for example, allowed to maintain different retirement ages for men and women. At the same time, even if there is no obligation flowing from EU gender equality law to equalise pensionable ages for men and women in the field of social security, gender equalisation is often a first step in reforms aimed at increasing the retirement age in general to preserve the adequacy and sustainability of pensions. Directive 2006/54/EC19 on employment and occupation covers occupational pension schemes. In accordance with the case law of the European Court of Justice, this framework also applies to pension schemes for a particular category of worker such as that of public servants if the benefits are paid by reason of the employment relationship with the public employer. In this case, these benefits are considered as pay. Finally, Directive 2004/113/EC20 prohibits discrimination between women and men in the access to and supply of goods and services and therefore covers private/individual pension products. It contains an exception enabling Member States to permit proportionate differences in individuals' premiums and benefits where the use of sex is a determining factor in the assessment of risk based on relevant and accurate actuarial and statistical data (Article 5 (2)). 2.8. Taxation

In parallel to its proposal of the IORP Directive, the Commission presented a Pension Taxation Communication21 in April 2001. At the time, many Member States did not grant tax relief for the payment of pension contributions to foreign pension funds, whereas they did so for payments to domestic funds. This would hinder the functioning of the proposed IORP Directive. The Pension Taxation Communication concluded that the Member States cannot discriminate against pension contributions paid to foreign IORPs. After attempts to find common solutions with the Member States in Council discussions, the Commission launched infringement procedures where necessary. Most Member States adapted their legislation. In two cases the Court of Justice of the EU ruled that if domestic pension contributions were tax
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Survey of Health, Ageing and Retirement in Europe, Mannheim Research Institute for the Economics of Aging (MEA), 2008 Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ L 6, 10.01.1979). Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast - OJ L 204 of 26.07.2006). It notably repeals Directive 86/378/EC (amended by Directive 96/97/EC) on occupational social security schemes (OJ L 225, 12.08.1986). Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services (OJ L 373 of 21.12.2004). The elimination of tax obstacles to the cross-border provision of occupational pensions, COM (2001) 214 final.

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deductible, contributions paid to IORPs elsewhere in the EEA should also be tax deductible22. Concrete result of the Commission's work in the area is that mobile workers can now remain in their home country pension scheme if they take up a job in another Member State and contributions to IORPs in other Member States can now be paid without tax discrimination. The Pension Taxation Communication also concluded that discriminatory tax rules can be an obstacle to the mobility of pensions. In Commission vs. Belgium23, the Court of Justice of the EU ruled that it is contrary to EU law to tax transfers of pension capital from domestic pension funds to funds established elsewhere in the EEA if transfers of pension capital between domestic pension funds are tax free. The Commission intends to examine whether there are any other Member States with similar rules. In April 2003 the Commission published a Dividend Taxation Communication24. On the basis of the case law of the Court of Justice of the EU this Communication concluded that dividends which leave a Member State (outbound dividends) cannot be taxed higher than dividends which stay in the country (domestic dividends). Further to the Communication the Commission opened a large number of infringement cases against those Member States that discriminated against foreign IORPs. Some Member States have already changed their law and eliminated the discriminations; a few others have been referred to the Court of Justice of the EU. 2.9. Statistics

Several EU bodies are involved in the statistical work for pensions. The purpose of the Indicator Sub-Group (ISG) of the Social Protection Committee (SPC) is to collect data on coverage and contribution rates. Eurostat collects data on social protection benefits (ESSPROS), disposable income (EU-SILC) and pension funds (Structural Business Statistics). The European Central Bank (ECB) collects statistics on the volumes (stocks and flows) of the assets and liabilities of pension funds and insurance corporations. The future European Systemic Risk Board (ESRB) is likely to step up its data requirements for financial stability purposes. The European Commission also participates in international work and has engaged in a joint project with the OECD to collect statistics on the adequacy of benefits from private pension provision. In the future, retired people will receive their pensions from at least two, if not more, sources (and pillars). Thus, the current statistical frameworks - even if improved - will not be able to provide comprehensive and reliable information on regular pension-type revenues. It is essential, therefore, to define precisely what sorts of regular receipts can be considered as a pension, how different revenue streams may be added, and how risks related to some resources are to be measured. 2.10. EU-wide reviews

A study carried out for the European Commission in 200725 provided an insight into the range of products in which retail clients invest when they save for the long term: namely term bank

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Commission vs. Belgium, Case C-522/04, Commission vs. Denmark, Case C-150/04. Case C-522/04. Dividend taxation of individuals in the Internal Market, COM(2003) 810 final. "The EU Market for Consumer Long-Term Retail Savings Vehicles" (BME Consulting, 15 November 2007); available at http://ec.europa.eu/internal_market/finances/docs/cross-sector/study_en.pdf

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deposits, securities, investment funds, life assurance contracts and funded pension schemes. It illustrated the degree of integration in this market in the EU. The study also provided a snapshot of the drivers of consumer behaviour, in terms of both reasons for saving and choice of vehicle. A more recent study carried out for European Commission in 200926 indicated that 13 Member States have some form of Equity Release Scheme (Austria, Bulgaria, Finland, France, Germany, Hungary, Ireland, Italy, Netherlands, Romania, Spain, Sweden, UK). The most significant markets are the UK, Ireland and Spain. ERS account for less than 0.1% of the EU mortgage market. The market for Loan model schemes is larger than that for Sale model schemes: the estimated volume of Loan model schemes is EUR 3.3 billion (50 000 contracts), whereas that for Sale model schemes is EUR 1.4 billion (with just under 20 000 contracts). 3. CEIOPS MAPPING OF EU PRUDENTIAL REGULATION

The statutory pay-as-you-go (PAYG) pension, an unfunded defined-benefit scheme, is the basis for the overall pension income for most EU citizens. A number of Member States have supplemented the statutory pension scheme with a funded tier in the form of a definedcontribution scheme, which is administered in many cases by a private financial institution. Other Member States have, instead of or in addition to these schemes, set up unallocated demographic reserve funds to support statutory PAYG pensions. In many Member States the statutory pension is supplemented by occupational pensions and individual pensions. In some instances occupational pensions are offered on a PAYG basis or through book reserves on the employer's balance sheet, although the bulk is provided through funded schemes operated by pension funds or insurance undertakings (e.g. group insurance contracts). Individual pensions are arranged by contract directly with a product provider generally a life assurance company or a pension fund. An individual’s contributions are accumulated and invested, and the resulting fund is subsequently used to provide pension benefits for the individual. Participation in occupational and individual schemes may be mandatory or voluntary, although increasingly Member States are allowing the possibility of opting-out from mandatory pension schemes. Mirroring the disparate developments in Member States, the distinction between the various pension pillars has also become less straight-forward in recent years. At the request of the Commission, CEIOPS has carried out a detailed mapping exercise in 2009 to clarify the EU prudential regulation that applies to the different pension schemes/institutions. The EU Directives considered were Directives 2003/41/EC (IORP), 2002/83/EC (Life) and 85/611/EEC (UCITS). Some Member States also referred to Directives 2006/48/EC (Banking) and Directive 93/22/EEC (Investment Services), repealed by Directive 2004/39/EC (MiFID). The remainder of this section summarises the main results of the mapping. The more detailed information is provided in Table 1.

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"Study on Equity Release Schemes in the EU" (Institut für Finanzdienstleistungen, January 2009); available at: http://ec.europa.eu/internal_market/finservices-retail/docs/credit/equity_release_part1_en.pdf

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Moreover, on the basis of this mapping, the Commission, with the collaboration of CEIOPS, is conducting a further exercise aiming to review data on private pension products. Preliminary results of this exercise indicate that occupational products reach a total of roughly €3.6 trillion, of which €2.6 trillion in IORPs, €0.5 trillion in insurance products and €0.5 trillion in other investment vehicles. Personal pension products account for around €1.7 trillion, of which €0.7 trillion in insurance products, € 0.9 trillion in other investment vehicles and a further €58 billion in IORPs. 3.1. Statutory funded pension schemes/institutions

Statutory funded pension schemes/institutions, whether mandatory or not, are covered by EU Regulations 883/2004 and 987/2009 (replacing Regulations 1408/71 and 574/72 since 1 May 2010). According to the mapping, they exist predominantly in the Member States that joined the EU in the period 2004-2007. Employers can pay contributions into the schemes in the case of EE. There are no EU prudential rules for the pension funds that are part of statutory funded pension schemes/institutions. Most of the Member States concerned therefore do not apply EU prudential regulation. Some Member States have, however, applied the Life or UCITS Directive to these pension funds. The mapping has highlighted the following situation: – IORP Directive: – Life Directive: – UCITS Directive: – Banking Directive: – Investment Services (MiFID): – No EU prudential rules: 3.2. n/a EE EE n/a n/a BG, LV, LT, HU, PL, RO, SK

Occupational pension schemes/institutions

The IORP Directive covers many occupational pension schemes/institutions, but not all. The Directive has been implemented by almost all the Member States, with only a few exceptions. Article 4 of the IORP Directive, allowing many of the rules in the IORP Directive to apply to the occupational retirement provision business of life assurance undertakings, is used in three Member States. The IORP Directive explicitly excludes book reserve and PAYG schemes from its scope. In many Member States there are also occupational pension schemes that are subject to the Life or UCITS Directives. The mapping has highlighted the following situation: – IORP Directive: - Implemented with a few exceptions. - Article 4: FR, LT, SE – Life Directive: – UCITS Directive: – Banking Directive: BE, DK, DE, EL, LU, NL, AT, PL, PT PL n/a

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– Investment Services (MiFID): – No EU prudential rules:

n/a - book reserves: BE, DE, IT, CY, LU, AT, PT, SE - PAYG: CY

3.3.

Individual pension schemes/institutions

Individual pension schemes/institutions are covered by a broad range of directives: Life, UCITS, banking and investment services (MiFID). The IORP Directive is also used by some Member States that have chosen to apply the IORP Directive to individual pension schemes in the national transposition (e.g. RO). There are, however, also a number of individual pension schemes/institutions that are not covered by any EU prudential regulation. These are voluntary supplementary pensions in the form of individual DC schemes in seven Member States (BG, CZ, ES, HU, MT, PT, SI). In some of these Member States, the employers can act as a third person to contribute to personal accounts (BG, CZ), while in another it is common practice for employers to pay contributions on behalf of the member (HU). By contrast, in some Member States (ES, MT), employers are not allowed to contribute to personal accounts. The mapping has produced the following situation: – IORP Directive: – Life Directive: IT, LV, RO BE, DK, DE, EE, IE, ES, FR, IT, CY, LT, LU, HU, NL AT, PL, PT, SE, UK – UCITS Directive: – Banking Directive: – Investment Services (MiFID): – No EU prudential rules: BE, DE, EE, LT, LU, HU, PL, PT DE, LU, HU, PL PL BG, CZ, ES, HU, MT, PT, SI

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Table 1 – EU regulation applicable to pension institutions/schemes Important note: This table was prepared by CEIOPS and the information reflects the situation prevailing in May 2010. It has however been the decision of each member of CEIOPS as to what kind of institution, scheme or product is included in the table. The national information is therefore not necessarily comprehensive. Important country-specific notes are contained at the end of this table.
Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N Types of pension schemes Mandator y/ voluntary / voluntary opt-out Source • Statutory funded • occupational • individual EU regulation

BE

IRP (Institutions de Retraite Professionnell e)/ IBP (Instelling voor Bedrijfspensio envoorziening )

until 01/01/2012: ASBL/VZW or AAM/OVV non-profit organisation or mutual insurance association

DB, DC or Voluntary mixed (b)

Occupational (c)

IORP

As from 01/01/2007: OFP Organisation for Financing Pensions limited partnership with a share capital same as above through group insurance + individual life insurance voluntary Occupational or individual Life

entreprise d’assurance/ verzekeringso nderneming

société par actions/ vennootschap op aandelen or société coopérative/ coöperatieve vennootschap or AAM (Association d’Assurances Mutuelles)/ OVV (Onderlinge Verenigingsve reniging)

cooperative partnership

mutual insurance association

fonds d'épargnepension / pensioenspaar fonds

OPCVM/ICBE: SICAV/BEVEK (d)

UCITS: open-end investment company

individual pensions savings

voluntary

individual

UCITS

EN

13

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Book reserves

DB/DC (e)

voluntary

occupational

Excluded from IORP Directive based on Art. 2.2.(e) IORP

BG

Пенсионноосигурително дружество Пенсионноосигурително дружество Пенсионноосигурително дружество

Акционерно дружество

Joint Stock Company

No

DC

Voluntary (a)

Occupational (b)

Акционерно дружество

Joint Stock Company

No

DC

Voluntary (a)

Individual (c)

No EU prudential legislation Regulation 1408/71 and 574/72

Акционерно дружество

Joint Stock Company

No

DC

mandatory Statutory funded (individual) (d) voluntary Individual, although occupational elements possible (a) occupational

CZ

penzijní fond

akciová společnost

joint-stock company

No

DC

No EU prudential regulation.

DK

Firmapensions Pensionskasse kasse

Company Pension Fund Life Insurance Company General Pension Funds Joint-stock company

No

DC or DB

Mandatory

IORP

Livsforsikrings selskab

Aktieselskab

No

DC or unitlinked DC or unitlinked

Voluntary/ Mandatory (a) Mandatory

Occupational/ Life individual

Tværgående pensionskasse

Pensionskasse

No

Life

DE

Pensionskasse

Aktiengesellsc haft

No

Voluntary (a)

occupational

IORP

Versicherungs Mutual insurance verein auf Gegenseitigkei association t Körperschaft des öffentlichen Rechts Anstalt des öffentlichen Rechts Corporationu nder public law

Institution under public law

EN

14

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Pensionsfonds (b)

Aktiengesellsc haft

Joint-stock company

No

Voluntary (a)

Occupational

IORP

Pensionsfonds Mutual verein auf pension fund Gegenseitigkei association t Direktzusage (book-reserve schemes) (b) No Voluntary (c) Occupational Excluded from IORP Directive based on Art.2.2(e) Excluded from IORP Directive based on Recital 16 and Art. 2.2(d)

Unterstützung skasse (b)

Gesellschaft mit beschränkter Haftung Eingetragener Verein Stiftung

Limited liability company Registered association Foundation

No

Voluntary (c)

Occupational

Lebensversich erungsunternehmen (Direktversich erung – direct insurance) (d)

Aktiengesellsc haft

Joint-stock company

No

Voluntary (a)

Occupational

Life

Versicherungs Mutual verein auf insurance Gegenseitigkei association t Körperschaft des Öffentlichen Rechts Corporation under public law

Anstalt des Institution öffentlichen under public Rechts law Altersvorsorge vertrag (contract) Basisrentenve rtrag (contract) EE Vabatahtlik pensionifond Lepinguline fond Contactual fund No Personal pension schemes Personal pension schemes DC Voluntary Individual Life, Banking, UCITS Life, Banking, UCITS UCITS+extr a requirement s

No

Voluntary

Individual

No

Voluntary

Individual

EN

15

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Kohustuslik pensionifond

Lepinguline fond

Contactual fund

No

DC

Mandatory

Statutory funded (individual)

UCITS+extr a requirement s Life

Elukindlustuss elts

Aktsiaselts

Joint Stock Company

No

DB or DC (Unitlinked) DB

Voluntary

Individual

Elukindlustuss elts

Аktsiaselts

Joint Stock Company

No

Mandatory

Statutory funded (individual) Occupational

Life

IE

Occupational Pension Scheme (a)

Trust

Trust

No

DB/DC/H Voluntary ybrid schemes and Trust Retireme nt Annuity Contracts Individual Retireme nt Annuity Contracts /Personal Pensions Voluntary

IORP

Personal pension

Contract

Contract

No

Individual

Life

Personal Retirement Savings Accounts EL ΤΑΜΕΙΑ ΕΠΑΓΓΕΛΜΑΤΙ ΚΗΣ ΑΣΦΑΛΙΣΗΣ (Τ.Ε.Α.)

Contract

Contract

No

Individual Voluntary retiremen t savings accounts Occupatio nal Insurance Funds (DC) (a) Voluntary

Individual

Life

Νοµικά πρόσωπα ιδιωτικού δικαίου (ν.π.ι.δ.) µη κερδοσκοπικο ύ χαρακτήρα.

Non-profit private entities with legal personality.

No

Occupational

IORP (b)

ΑΣΦΑΛΙΣΤΙΚΕ Σ ΕΠΙΧΕΙΡΗΣΕΙΣ

Group Insurance Contracts (c) Fondo de Pensiones de empleo Fondo de Pensiones personal IORP No DC, DB, or mixed Voluntary occupational

Life (d)

ES

Fondo de Pensiones de empleo Fondo de Pensiones personal

IORP

Personal Pension Fund

No

Individual Voluntary and associate d pension scheme

Individual (a)

No relevant prudential EU legislation applicable

(b)

EN

16

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Seguros colectivos

Collective Life Insurance

Collective Life Insurance Contract Collective Life Insurance Contract

No

DB

Voluntary

occupational

Life (in general)

PPSE (Employer Social Prevision Plan) PPA (Prevision Plan Assured)

Collective Life Insurance

No

DB

Voluntary

occupational

Life (in general)

Individual Life Insurance

Individual Life Insurance Contract Stock company Or Mutual insurance company Paritarian institution ruled by the “social protection code” Mutual company ruled by a specific code Association/f oundation

No

DB

Voluntary

Individual

Life (in general)

FR

assureur vie

Société anonyme Or Société d’assurance mutuelle

DC/DB

Occupational or individual (a)

IORP (Art. 4) or Life (b)

Institution de prévoyance

Institution de prévoyance

DC/DB

Occupational or individual (a)

IORP (Art. 4) or Life (b)

« mutuelle »

Mutuelle du code de la mutualité

DC/DB

Occupational or individual (a) Voluntary optingout Occupational

IORP (Art. 4) or Life (b) IORP

IT

Fondi pensione negoziali (a)

Associazione/f ondazione

No

DC

Fondi pensione aperti (b)

Patrimonio di destinazione autonomo istituito da una società finanziaria in modo separato rispetto al patrimonio della stessa

An autonomous pool of assets instituted by a financial company separately from its own assets

No

DC

Voluntary optingout/Volunt ary

occupational/ Individual

IORP

EN

17

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Fondi pensione preesistenti autonomi (c) Fondi pensione preesistenti (non autonomi) (d)

Associazione/f ondazione

Association/f oundation

No

DC, DB closed to new members DC, DB closed to new members

Voluntary optingout

occupational

IORP

Fondi pensione interni ai bilanci delle società promotrici

Book reserve

No

Voluntary opting-out

occupational

Excluded from IORP Directive based on Art. 2.2(e) (d)

Enti privati di previdenza obbligatoria dei liberi professionisti (e) Piani pensionistici individuali (Pip) (f)

Associazione/f ondazione

Association/ Foundation

Yes

DB/DC

Mandatory Statutory funded

Regulation 1408/71

Patrimonio di destinazione autonomo istituito da una compagnia di assicurazione in modo separato rispetto al patrimonio della stessa Νοµικά Πρόσωπα Ιδιωτικού ∆ικαίου

An autonomous pool of assets instituted by an insurance company separately from its own assets

No

Voluntary

Individual

Life

CY

Ταµεία Προνοίας

Provident Funds Private Entities with Legal Personality

No

DC/DB set up via collective agreemen ts

Mandatory or Voluntary (determin ed by the rules of each provident fund)

Occupational (a)

IORP

Ταµεία Συντάξεως

Νοµικά Πρόσωπα Ιδιωτικού ∆ικαίου

Pension Funds – Private Entities with Legal Personality Insurance Contract

No

DB set up Mandatory via collective agreemen ts

Occupational (b)

IORP

Επενδυτικά Ατοµικά Σχέδια Ζωής

Ασφαλιστικό Συµβόλαιο

No

Unit Linked Personal Life Contracts DB

Voluntary Opt Out

Individual

Life

Σχέδια Συντάξεως (c)

Pay as you go pension schemes

No

Mandatory

occupational

Excluded from the IORP Directive

EN

18

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Σχέδιο Φιλοδωρήµατο ς (d)

Book reserve

No

DB

Mandatory

occupational

Excluded from the IORP Directive IORP (b)

LV

Privātais pensiju fonds

Akciju sabiedrība

Stock company

No

DC/DB

voluntary

Occupational and individual (a)

N/A

State funded pension scheme (c) Asociacija Association

DC

Mandatory Statutory , voluntary funded

Regulation 1408/71

LT

Pensijų asociacija

DC, DB (a)

Voluntary

Occupational

IORP

Gyvybės draudimo įmonė, vykdanti profesinių pensijų kaupimo veiklą

Akcinė bendrovė/ Uždaroji akcinė bendrovė/Eur opos Bendrovė

Public limited liability company/Pri vate limited liability company/Eu ropean company (Societas Europaea) Public limited liability company/Pri vate limited liability company/ Public limited liability company/Pri vate limited liability company/Eu ropean company (Societas Europaea) Public limited liability company/Pri vate limited liability company/ No

Voluntary Life assurance contract under which occupatio nal pensions are accumula ted DC Voluntary

Occupational

IORP (Art. 4)

Valdymo įmonė

Akcinė bendrovė/Užd aroji akcinė bendrovė

Statutory funded

Excluded from IORP Directive based on Art. 2.2(a)

Gyvybės draudimo įmonė

Akcinė bendrovė/ Uždaroji akcinė bendrovė/Eur opos Bendrovė

No

DC

Voluntary

Statutory funded

Excluded from IORP Directive based on Art. 2.2(a)

Valdymo įmonė

Akcinė bendrovė/Užd aroji akcinė bendrovė

DC

Voluntary

individual

UCITS (b)

EN

19

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Gyvybės draudimo įmonė

Akcinė bendrovė/ Uždaroji akcinė bendrovė/Eur opos Bendrovė

Public limited liability company/Pri vate limited liability company/Eu ropean company (Societas Europaea) Pension savings companies with variable capital and pension savings associations Mutual insurance associations, co-operative companies, co-operative companies organized as a public limited company, charitable associations No

Life assurance contract

Voluntary

individual

Life

LU

Fonds de pension (CSSF) (a)

Sepcav and assep

voluntary

Occupational

IORP

Fonds de pension (CAA) (b)

Association d’assurances mutuelles, société coopérative, société coopérative organisée comme une société anonyme ou association sans but lucratif

No

voluntary

Occupational

IORP

Assurances de groupe

Insurance Enterprise d’assurances / company/ Group Contrats insurance d’assurance contracts groupe NA Provisions bilan NA au Bookreserve schemes

No

voluntary

Occupational

Life

Régime interne de pension

No

voluntary

Occupational

No relevant prudential EU legislation applicable

EN

20

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Contrat de prévoyancevieillesse

Produits de prévoyancevieillesse représentés par des produits d’assurance ainsi que par des produits bancaires investis dans des organismes de placement collectif agréés magánnyugdíj pénztár

Pension products represented by insurance products as well as by banking products invested in licensed units for collective investment

No

voluntary

Individual

Life, Banking, UCITS (c)

HU

magánnyugdíj pénztár

Associationlike special legal form Associationlike special legal form

No

DC (a)

mandatory Statutory funded (individual) voluntary Individual (b)

Regulation 1408/71

önkéntes nyugdíjpénztá r

önkéntes nyugdíjpénztá r

No

DC

No relevant prudential EU legislation applicable Life

Nyugdíjbiztosí tás (Life Insurance company)

- életbiztosító rt. - biztosító egyesület Foglalkoztatói nyugdíjszolgál tató rt.

- joint-stock company - association

No

Pension insurance

voluntary

Individual

foglalkoztatói nyugdíjszolgál tatás nyugdíjelőtak arékossági számla (c) MT Occupational Retirement Scheme

Joint stock company

No

DB/DC

voluntary

Occupational

IORP

pension saving account Trust Contractual Trust Contractual (a)

No

DC

voluntary

Individual

Banking, UCITS (c)

No

Trust Deed Contract between the employer and the Retireme nt Scheme Administr ator

Voluntary (b)

occupational

IORP (c)

EN

21

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Personal Retirement Scheme

Trust Contractual

Trust Contractual (a)

No

Trust Deed Contract between member and the Retireme nt Scheme Administr ator

Individual (d)

No EU prudential legislation

NL

Pensioenfonds (´pension fund´)

Stichting

Foundation (a)

No

Mandatory for industrywide schemes Voluntary opt-out for company schemes

Occupational (b)

IORP

Verzekeraar (´insurance company´ or ´insurer´) AT Pensionskasse

Naamloze vennootschap

Public limited company

No

Voluntary

Occupational (b)/individual

Life

Aktiengesellsc haften

Joint-stock company

No

DB and DC

voluntary

occupational

IORP

Betriebliche Kollektivversic herung

Aktiengesellsc haften, Versicherungs verein auf Gegenseitigkei t and SE Aktiengesellsc haften, Versicherungs verein auf Gegenseitigkei t and SE

Joint-stock company, mutual insurance association and SE Joint-stock company, mutual insurance association and SE

No

DB and DC

voluntary

occupational

Life

Lebensindivid ual- und Gruppenrente nersicherung

No

DB and DC

voluntary

Individual

Life

Direkte Leistungszusa gen (Bookreserve schemes)

No

DB/DC

voluntary

Occupational

Excluded from IORP Directive based on Art 2.2(e)

EN

22

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

PL

pracowniczy fundusz emerytalny

fundusz emerytalny (osoba prawna)

occupational pension fund (in Polish legal framework is registered as separate legal entity) joint-stock company

No

DC

voluntary

Occupational (a)

IORP (b)

zakład ubezpieczeń na życie fundusz inwestycyjny otwarty

spółka akcyjna

No

DC

voluntary

Occupational (a)

Life

fundusz inwestycyjny

investment fund (in Polish legal framework is registered as separate legal entity Not specified – all form of IORPs notified by relevant authorities from other Member States

No

DC

voluntary

Occupational (a)

UCITS

zarządzający zagraniczny (foreign manager)

No

DC

voluntary

Occupational (a)

IORP (c)

Otwarty fundusz emerytalny

fundusz emerytalny (osoba prawna)

Open pension fund (in Polish legal framework is registered as separate legal entity)

No

DC

mandatory Statutory funded

Regulation 1408/71

EN

23

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Indywidualne konta emerytalne

1) Fundusz inwestycyjny, 2) Zakład ubezpieczeń na życie, 3) Bank, 4) instytucja prowadząca działalność maklerską.

1) Investment fund -in Polish legal framework is registered as separate legal entity, 2) jointstock company, 3) jointstock company, 4) Limited company or joint-stock company

No

DC

voluntary

individual

1) UCITS 2) Life 3) Banking 4) ISD

PT

Fundos de pensões fechados (closed pension funds) Adesões colectivas a fundos de pensões abertos (collective membership of open pension funds) Contratos de seguro de grupo (group insurance policies) Planos de poupança-refo rma (saving-retire ment schemes)

Fundos de pensões

Pension funds

No

DB / DC

Voluntary

occupational

IORP

Fundos de pensões

Pension funds

No

DB / DC

Voluntary

occupational

IORP

Contratos de seguro

Insurance policies

No

DB / DC

Voluntary

occupational

Life

1) Fundos pensões

de 1) Pension funds 2) Insurance policies

No

DC

Voluntary

individual

2) Contratos de seguro

1) No relevant EU prudential regulation (a) 2) Life 3) UCITS

3) Fundos de 3) Investme nt funds investimento

EN

24

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Adesões individuais a fundos de pensões abertos (individual membership of open pension funds) Contratos de seguro individuais (individual insurance policies) Planos de pensões financiados no balanço da empresa (book-reserve schemes) RO Administrator al unui fond de pensii administrat privat

Fundos pensões

de Pension funds

No

DC

Voluntary

individual

No relevant EU prudential regulation (b)

Contratos seguro

de Insurance policies

No

DC

Voluntary

individual

Life

No

DB/DC (c)

voluntary

occupational

Excluded from IORP Directive based on Art. 2.2(e)

Administrator ul unui fond de pensii administrat privat Societate pe actiuni

Administrato r of a privately administrate d pension fund- joint stock company Administrato r of voluntary pension funds - joint stock company Joint-stock company Joint-stock company

No

hybrid DC (a)

Mandatory

Statutory funded (individual)

Regulation 1408/71

Administrator de fonduri de pensii facultative

Administrator ul de fonduri de pensii facultative Societate pe actiuni

Yes

DC (b)

Voluntary

individual

IORP (c)

SI

Pokojninska družba Zavarovalnica

Delniška družba Delniška družba

No

DC

Voluntary opt-out Voluntary opt-out

Occupational (a) Occupational (b)

IORP

No

DC

IORP

EN

25

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Vzajemni pokojninski sklad

Vzajemni pokojninski sklad, upravjavci: banka, zavarovalnica, pokojninska družba

Mutual pension fund, managed by bank, insurance company, pension insurance company Found

No

DC

Voluntary Occupational opt-out, (c) Mandatory for certain occupation s

IORP

Sklad obrtnikov in podjetnikov (SOP)

Sklad

No

DC/DB

Voluntary

Individual

No relevant prudential EU legislation applicable to the pension product Regulation 1408/71 and 574/72

SK

dôchodková správcovská spoločnosť

akciová spoločnosť

joint stock company

No

DC (personal, protected ) DC (hybrid, unprotect ed) DB

Voluntary

Statutory funded (individual)

doplnková dôchodková spoločnosť

akciová spoločnosť.

joint stock company

No

Voluntary, in general (a) voluntary

Individual, in IORP general (b)

FI

ETAeläkesäätiö lisäeläkesäätiö

company pension fund (independen t legal entity) industrywide pension fund (independen t legal entity) Proprietary life insurance company

No

occupational

IORP

ETAlisäeläkekassa

eläkekassa

No

DB

voluntary

occupational

IORP

SE

Livförsäkrings bolag

Aktiebolag

No

DC/DB

Voluntary (a)

1) Occupational 2) individual (b)

1) IORP (Art. 4) 2) Life

Livförsäkrings bolag

Ömsesidigt bolag

Mutual life insurance company

No

DC/DB

Voluntary (a)

1) Occupational 2) individual (b)

1) IORP (Art. 4) 2) Life

Tjänstepensio nskassa

Understödsför ening

Occupational pension fund

No

DC/DB

Voluntary (a)

Occupational and individual

IORP

EN

26

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Pensionsstiftel se (c)

Stiftelse

Pension foundation

No

None, investme nts only DB

Voluntary (a)

Occupational

IORP

Särskild redovisning av pensionsskuld (Book reserves) (d) UK Occupational DB scheme Trust Trust (a)

No

Voluntary (a)

Occupational

Excluded from IORP Directive based on Art. 2.2(e) IORP

No

DB

Voluntary

occupational

Occupational DC scheme

Trust

Trust (a)

No

DC

Voluntary

occupational

IORP

Occupational Hybrid scheme Personal pension scheme IS Lífeyrissjóður

Trust

Trust (a)

No

DB/DC (b)

Voluntary

occupational

IORP

Contract

Contract

No

DC

Voluntary

individual

Life

Sjóður

Fund

No

DB/DC

Mandatory and voluntary

Occupational (a) and individual Occupational (a)

No EU prudential legislation Regulation 1408/71 and 574/72

LI

Pension Funds Stiftung (Pensionskass e)

Foundation

Yes

DB or DC Mandatory collective foundatio n or captive foundatio n

Pensions funds (Pensionsfond s)

Stiftung, Aktiengesellsc haft, Europäische Aktiengesellsc haft, Genosenschaf t Europäische Genossenscha ft

Foundation, Limited company, Societas europa, Cooperative society Societas Cooperativa Europaea

No

DB or DC Voluntary biometric risk or not call for additional cover or not

Occupational (b)

IORP

EN

27

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Insurance company (Versicherung sunternehmen , direkte Lebensversich erung) NO Foretakspensj ons-ordninger

Aktiengesellsc haft, Genossenscha ft

Limited company, Cooperative Society

No

DC or DB

Voluntary

Occupational

IORP (Art.4)

1) Pension 1) Pensjonskasse funds r 2) Livsforsikrings - selskaper 3) Life insurance companies

No

DB

occupational It is mandatory to have a DC or a DB scheme

1) IORP 2) Life

Innskuddspen sjonsordninger

1)Pension 1) Pensjonskasse fund, r 2) Innskuddspen sjons-foretak 3) Livsforsikrings -selskaper 4) Banker 4)Banks 5) Forvaltningsse 5) Companies lskap for verdipapirfond which manage securities funds 2) Defined contribution pension undertakings , 3)Life insurance companies

No

DC

Occupational It is mandatory to have a DC or a DB scheme

1) IORP 2) IORP 3) Life 4) Banking 5) UCITS

Individual pension schemes

1) Livsforsikrings selskaper 2) Banker 3) Forvaltningsse lskap for verdipapirfond

1) Life insurance companies 2)Banks 3) Companies which manage securities funds

No

DC

Voluntary

Individual

1) Life 2) Banking 3) UCITS 4) IORP

4) Pensjonskasse 4) Pension r fund (e)

EN

28

EN

Types of the private pension institutions Domestic name Legal form (domestic) Legal form (English) Art. 3? Y/N

Types of pension schemes

Mandator y/ voluntary / voluntary opt-out

Source • Statutory funded • occupational • individual

EU regulation

Statens Pension fund Pensjonskasse

Statens Pensjonskas se is a pension fund administerin g pension schemes for state employees and certain other groups of employees Pension schemes based on contract where the benefits are paid by the employer/un dertaking

DB

Mandatory

Occupational

Excluded from IORP directive based on Art. 2.2. (a) and/or (c)

Book reserves (a)

Usually DB (b)

voluntary

Occupational

Excluded from IORP directive based on Art. 2.2. (e)

Pensjonsfond (c)

pension fund

DB

Mandatory if a pension fund as mentioned is establishe d Mandatory

Occupational

Excluded from IORP directive based on Art. 2.2 (c) and/or (d)

pension funds

pension schemes fixed by law for certain occupational groups (d)

DB

Occupational

Excluded from IORP directive based on Art. 2.2(c)

pension fund Pension fund sponsored by for medical parctitioners State

DB

Mandatory

Occupational

Excluded from IORP directive based on Art. 2.2(c) Excluded from IORP directive based on Art. 2.2(c)

pension funds sponsored partly by the State

Pension funds administratin g early retirement schemes

DB

Voluntary

Occupational

Note: The column "Art. 3? Y/N" indicates whether or not Article 3 of the IORP Directive applies. This article specifies that institutions for occupational retirement provision which also operate compulsory employment-related pension schemes which are considered to be social-security schemes covered by Regulations (EEC) No 1408/71 and (EEC) No 574/72 shall be covered by the IORP Directive in respect of their non-compulsory occupational retirement provision business.

Country-specific notes to the table:

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Belgium (BE) a) The legal forms possible until 01/01/2012 are: ASBL (Association Sans But Lucratif)/VZW (Vereniging Zonder Winstoogmerk), or AAM (Association d’Assurances Mutuelles)/OVV (Onderlinge Verenigingsvereniging). The new legal form since 01/01/2007 is the OFP (Organisme de Financement de Pensions/Organisme voor de Financiering van Pensioenen). b) Voluntary opt-out in some industry-wide schemes under certain conditions. c) Scope of schemes: employer, industry-sector or self-employed (some are organised by profession but not necessarily); an IORP may manage several types of schemes with different scopes. d) Organisme de placement collectif en valeurs mobilières (OPCVM) / instelling voor collectieve belegging (ICBE): organismes de placement collectif publics à nombre variable de parts (SICAV) / openbare instellingen voor collectieve belegging met veranderlijk aantal rechten van deelneming (BEVEK). e) The scope is limited to providing pension benefits to company managers. Bulgaria (BG) (a) Each insured person in a voluntary pension fund has an individual account in which his/her personal contributions are accumulated. In the same personal account contributions can be made by employers or third persons with prior consent from the insured person. (b) The occupational pension schemes are managed within pension funds which are legal persons. The pension funds are established and managed by pension insurance companies, which are joint stock companies. The pension insurance companies manage separate pension funds for voluntary occupational schemes. (c) The individual pension schemes are managed within pension funds which are legal persons. The pension funds are established and managed by pension insurance companies, which are joint stock companies. The pension insurance companies manage separate pension funds for voluntary individual schemes. (d) The mandatory pension schemes are managed within pension funds which are legal persons. The pension funds are established and managed by pension insurance companies, which are joint stock companies. The pension insurance companies manage separate pension funds for mandatory schemes (universal and professional pension funds).

Czech Republic (CZ) a) This product is based on an individual contract that can be concluded regardless of the client’s occupational status. However, there can be some occupational element in the sense that an employer can act as a third person contributing to the client’s account. In 2008, this was the case for approximately 25% of clients. Denmark (DK) a) For life insurance companies participation is mandatory and the scheme belongs to the occupational pillar when the scheme is part of a pension plan in a company. Germany (DE) a) In general voluntary. In some areas, there are collective agreements providing for obligatory occupational retirement provisions or financial incentives for employees for deferred compensation. b) The insolvency coverage by the PSVaG (Pensions-Sicherungs-Verein Versicherungsverein auf Gegenseitigkeit) applies to this type of occupational retirement provisions (insolvency of the employer). c) In general voluntary. In some areas, there are collective agreements providing for obligatory occupational retirement provisions. d) Under certain circumstances, the insolvency coverage by the PSVaG (Pensions-Sicherungs-Verein Versicherungsverein auf Gegenseitigkeit) applies to this type of occupational retirement provisions (insolvency of the employer). Ireland (IE)

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a) The pension scheme is the institution for occupational retirement provision. Legal separation of pension fund assets from all other assets is achieved via the trust mechanism under which all pension schemes are set up. Greece (EL) a) Occupational Insurance Funds are independent legal entities. They are established on a voluntary basis in each company or sector(s) of employment on the initiative either of employees or employers or through an agreement between employees and employers as well as on the initiative of self-employed or independent professionals or farmers or their associations. Depending on the type of arrangement, Occupational Insurance Funds can provide benefits in kind or in cash, in the form of annuity or as a lump sum. Occupational Insurance Funds that provide retirement benefits operate on a funded basis (DC pension schemes). b) In addition, also Directive 98/49/EC (safeguarding the supplementary pension rights) and Directive 2006/54/EC (equal opportunities) apply. c) Group Insurance Contracts concluded between the employer and the insurance company in the sectors VII "management of group pension funds" or IX "works similar to social security". d) In addition, Directive 98/49/EC (safeguarding the supplementary pension rights) applies. Spain (ES) a) Employers cannot pay contributions on behalf of members into this scheme. b) The national legislation applicable is the Pension Plan and Fund Act (Texto Refundido de la Ley 8/1987, de regulación de Planes y Fondos de Pensiones) of 29 November 2002. France (FR) a) All these institutions are able to sell: (i) occupational pension schemes, in particular “Article 83” schemes (definedcontribution), “article 39” schemes (defined-benefit) or “contrats Madelin” schemes (defined-contribution); or (ii) individual life insurance (individual pension savings). b) For occupational retirement provision, the institution can decide about the regulatory framework: life directive or IORP directive, with application of its article 4. The institution has to ask for a specific agreement if it wants to use the IORP directive. For individual retirement provision, the life directive applies. Italy (IT) a) Independent legal entity set up as a result of an agreement between employers and trade unions at industry level (also company, group, or regional funds are possible and have in fact been instituted). b) Pension funds instituted by financial intermediaries (banks, insurance companies, etc) as segregated assets. They can host both occupational and personal schemes. c) Pension funds instituted before 1993 as an independent legal entity. d) Non-autonomous pension funds instituted before 1993 as book reserves within the balance sheet of an employer. When the company that sets up the pension fund is a bank or an insurance, which is the typical case, the banking directive or insurance directive applies. e) Independent private entities operating social security schemes for several categories of self-employed, professional workers (such as lawyer, etc.). f) Personal retirement plans based on individual life insurance companies. Cyprus (CY) a) There are company provident funds and industry-wide provident funds, which provide lump sum benefits. b) There are employees´ pension funds (private companies, semi public organizations and local authorities) and pension funds for self employed (advocates and doctors).

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c) These schemes have no legal personality. They are pay as you go pension schemes that provide a lump sum benefit and a monthly benefit for life. d) These schemes have no legal personality. They are book reserve retirement bonus schemes that provide a lump sum benefit. Latvia (LV) a) There are closed pension funds which provide only occupational pensions and open pension funds which are allowed to operate both occupational and individual pensions. b) In addition, Directive 98/49/EC (safeguarding the supplementary pension rights) applies. c) This scheme is part of the state pension and contributions paid to the scheme are part of the social tax. The scheme is operated by the State social security agency. The assets of the scheme are managed by private asset managers (they are not IORPs). State funded pension scheme could be treated as part of the funded tier of statutory pensions. d) Voluntary for those socially insured persons who were at age between 30 and 45 at 01.07.2001. Lithuania (LT) a) DB schemes shall be implemented only for individuals who are not subject to the Lithuanian social security and labour legislation, i.e. in case of cross-border activities. b) No relevant prudential EU legislation applicable to the pension product. However, Directive 85/611/EEC (UCITS) is applied for the providers. Luxembourg (LU) a) Authorised and supervised by CSSF. b) Authorised and supervised by Commissariat aux Assurances. c) No relevant prudential EU legislation applicable to the pension product. To the provider: Directive 2002/83/EC for underlying insurance contracts, Banking Directive 2006/48/EC and UCITS directive (2001/108/EC). Hungary (HU) a) Since 1.1.2010, there is a performance guarantee equal to inflation. b) Members are obliged to pay contribution. However the employer has the possibility to pay contribution on behalf of the member. c) This is a special saving account with tax incentives. There is no relevant prudential EU legislation applicable to the pension product. To the provider: Banking Directive 2006/48/EC and UCITS directive (2001/108/EC). Malta (MT) a) A Retirement Scheme of a contractual nature consists of a separate pool of assets with no legal personality with the purpose of providing retirement benefits. b) Currently the pension system in Malta is still based on state pension provisioning. c) In addition, Directive 98/49/EC (safeguarding the supplementary pension rights) applies. d) An employer cannot contribute to Personal Retirement Schemes that may be established in terms of the current legislation. These Personal Retirement Schemes would be funded solely by contributions from the individual. Netherlands (NL) a) Various legal forms are permitted, but pension funds almost exclusively prefer a Foundation. b) As for occupational pension schemes, the social and labour law and the information requirements are the same for insurers and pension funds.

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Poland (PL) a) There are four legal forms of occupational pension plans in Poland which could be freely chosen by an employer as the plan sponsor. b) “Pracowniczy fundusz emerytalny” is a Polish financial institution (fund) which operates in Poland and under the Polish law and its only two tasks are to accumulate and to administer contributions (premiums) from sponsoring undertakings for occupational pension purposes. This institution fulfils criteria for IORPs under Article 6a of the IORP Directive, so it can also operate cross-border in other Member States. c) “Zarzadzajacy zagraniczny” is a foreign IORP which operates cross-border in Poland, in the meaning of the Polish law. Portugal (PT) a) These institutions are out of the scope of the IORP Directive because they are institutions for personal retirement provision. They are covered either by the Life or UCITS Directive or by the national pension fund legislation. The national pension fund legislation (one single Decree-Law), which always covered both occupational and individual schemes, was updated to reflect the requirements of the IORP Directive. b) These institutions are out of the scope of the IORP Directive because they are institutions for personal retirement provision. They are covered by national pension fund legislation. This legislation (one single Decree-Law), which always covered both occupational and individual schemes, was updated to reflect the requirements of the IORP Directive. c) Usually covers retirement benefits that are not tax qualified, e.g. early retirement programmes. Romania (RO) a) Personal, mandatory, minimum benefit established by Law, funded pension scheme with automatic enrolment. b) Voluntary, unprotected, funded pension scheme. c) In the national implementation. Slovenia (SI) a) May offer individual pension policies. b) May offer individual pension policies and life insurance. c) The mutual pension fund is not a legal entity. It may offer individual policies. Slovakia (SK) a) Mandatory for certain categories of employees (e.g. miners). b) Occupational for certain categories of employees (e.g. miners). Sweden (SE) a) Voluntary, though most occupational pension is mandatory through collective agreements. b) May offer life insurance (separate) as well. c) Linked to companies who have technical provisions as DB book reserves (outside of IORP directive scope) d) Companies recently try to set up book reserves even for DC schemes. The Swedish authorities have therefore initiated a discussion with the companies to begin in the near future. By law it is required that the book reserves must be secured. Normally this is done through credit insurance. United Kingdom (UK) a) The pension scheme is classed as the institution. As such there is no legal separation. Legal separation of pension fund assets from all other assets is achieved via the trust mechanism under which all pension schemes are set up.

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b) Legally classified in UK as DB but has some guarantees and some money purchase elements. Iceland (IS) a) Pensions fund are in many cases based on profession, but some professions can choose in which pension fund they pay. Liechtenstein (LI) a) Beside the statutory pillar (old age, disability and survivors’ insurance; AHV), Liechtenstein has also a mandatory occupational pillar to supplement the statutory pillar. For each employee for whom an employer has the obligation to pay contributions to the social insurance (statutory pillar), the employer has also the obligation to pay to an occupational DB or DC scheme (beside some exceptions; minimum contributions are stipulated by law). The relevant law is the “Gesetz vom 20. Oktober 1987 über die betriebliche Personalvorsorge” (BPVG). b) For an employee having the obligation to pay contributions to the social insurance (statutory pillar), only voluntary contributions can be made into a pension plan according to the “Gesetz vom 24. November 2006 betreffend die Aufsicht über Einrichtungen der betrieblichen Altersversorgung” (Pensionsfondsgesetz; PFG), with which directive 2003/41/EC was implemented. The mandatory part has to be paid into a pension plan according to the BPVG. c) Insurance company (Versicherungsunternehmen, direkte Lebensversicherung). Norway (NO) a) The use of this kind of schemes is unknown and probable very limited. b) Usually DB schemes based on contract and usually limited to providing pension benefits to company managers. c) All pensjonsfond are established according to tax regulation before 1968. Pensjonsfond are without guaranteed benefits. The benefits are derived according to certain rules laid down in tax law on the basis of the size of the fund. Benefits from these pension funds are paid primarily in order to compensate employers/pensioners born before 1917 for reduced benefits from State pension scheme. d) The pension schemes are fixed by legislation. e) It is legally possible for pension funds to offer individual pension schemes to members.

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