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

EN EN
 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.

1
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. KEY CHALLENGES

2.1. 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.

2
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.
3
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.
4
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.
5
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.

6
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.
7
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.

(2) 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).

(3) 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.

(4) 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.

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.

8
"Quality and viability of pensions – Joint report on objectives and working methods in the area of
pensions" [10672/01 ECOFIN 198 SOC 272].
9
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.

10
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.
11
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.
12
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

13
OECD, "Pensions and the crisis – How should retirement income systems respond to financial and
economic pressures" 2009.
14
OECD "Pension Markets in Focus", October 2009, Issue 6.
15
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.

16
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."
17
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?

(2) Is the existing pension framework at the EU level sufficient to ensure sustainable
public finances?

3.2. Achieving a sustainable balance between time spent in work and in retirement

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

18
Chapter 3.2.1 of the Interim Joint Report on pensions, see footnote 2.
19
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?

(4) 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?

3.3. Removing obstacles to mobility in the EU

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

20
A better transposition and application of the Employment Equality Directive (2000/78/EC) and the
realisation of the added value of older staff is needed. Age is the most common perceived disadvantage
when seeking a job, see http://ec.europa.eu/public_opinion/archives/ebs/ebs_317_en.pdf.
21
Chapter 2.1 of the Interim Joint Report on pensions, see footnote 2.
22
See Commission Staff Working Document SEC(2010)830.

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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

23
See footnote 22 for more information on the current EU framework on pensions.
24
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.
25
IAS 19 Employee Benefits applies to the sponsoring undertakings.
26
IAS Regulation 1606/2002.

EN 11 EN
 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?

3.3.2. Mobility of pensions

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

27
The Monti Report also suggests an option to explore the 28th regime for supplementary pension rights,
see A NEW STRATEGY FOR THE SINGLE MARKET AT THE SERVICE OF EUROPE'S
ECONOMY AND SOCIETY, Report to the President of the European Commission José Manuel
Barroso by Mario Monti, 9 May 2010, p.58.
28
For example, setting up a cross-border EU pension fund for highly mobile workers (e.g. researchers)
could be an option. See "Feasibility Study of a Pan-European pension fund for EU researchers", Hewitt
Associates on behalf of the European Commission (DG RTD), May 2010.

EN 12 EN
 between domestic pension funds are tax free29. The Commission intends to examine whether
there are any other Member States with similar rules.

(6) What should be the scope of schemes covered by EU level action on removing
obstacles for mobility?

(7) 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?

3.4. Safer, more transparent pensions with better awareness and information

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.

(2) Similar pension schemes are covered by different EU rules thus raising issues of
consistency.

(3) There are unclear boundaries between: social security schemes and private schemes;
occupational and individual schemes; and voluntary and mandatory schemes.

(4) 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.

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.

29
Commission vs. Belgium, Case C-522/04.

EN 13 EN
 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?

(9) 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?

3.4.2. Improving the solvency regime for pension funds

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
EFRP survey on DC pensions 2010.
31
OECD Pension Market in Focus Oct. 2009.

EN 14 EN
 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) What should an equivalent solvency regime for pension funds look like?

3.4.3. 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
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).
33
2008/94/EC
34
SEC(2008) 475, 11.4.2008.
35
OJ 2009/ S 230-329482.

EN 15 EN
 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)?

(13) Should the EU develop a common approach for default options about participation
and investment choice?

4. IMPROVING EU STATISTICS ON PENSIONS

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

EN 16 EN
 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?

EN 17 EN
 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.

EN 18 EN
 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

EN 19 EN
 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-You-
Go 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.

EN 20 EN
 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 Pensions-
Sicherungs-Verein Versicherungsverein auf Gegenseitigkeit (PSVaG) in Germany and the
Pension Protection Fund in the UK.

EN 21 EN
 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.

EN 22 EN
 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

EN 23 EN
 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.

EN 24 EN
 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+ 20 to 63 / 64+ 20 to 66 / 67+ 20 to 69 / 70+
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

Source: Eurostat, Population Projections, 2008 data.

EN 25 EN
 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.

EN 26 EN
 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
BE 45 43 -4
BG 44 36 -20 44 41 -8
CZ 45 38 -17
DK 39 38 -4 64 75 17
DE 51 42 -17
EE 26 16 -40 26 22 -18
IE 27 32 16
EL 73 80 10
ES 58 52 -10 62 57 -8
FR 63 48 -25
IT 68 47 -31
CY 54 57 5
LV 24 13 -47 24 25 4
LT 33 28 -16 33 32 -2
LU 46 44 -4 46 44 -4
HU 39 36 -8 39 38 -3
MT 42 40 -6
NL 44 41 -7 74 81 10
AT 55 39 -30
PL 56 26 -54 56 31 -44
PT 46 33 -29 47 33 -31
RO 29 37 26 29 41 41
SI 41 39 -6 41 40 -2
SK 45 33 -27 45 40 -11
FI 49 47 -5
SE 49 30 -39 64 46 -27
UK 35 37 7
NO 51 47 -8

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).

EN 27 EN
 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

-15

-25

IT
CZ
PT

MT

LT

AT
IE
FI

SI
FR

LU

HU
PL

EL

NL

BG
RO
SE
LV
ES

UK

DE

SK

BE

DK
EE
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.

EN 28 EN
 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.

EN 29 EN
 Further increases
Statutory retirement
Average exit age Average exit age from age
Statutory retirement
Member State from the labour force the labour force in in the statutory retirement age
age for M/W in 2009
in 2001 2008
for M/W in 2020
for M/W after 2020

Belgium 56.8 61.6* 65/65 65/65

Bulgaria 58.4 61.5 63/60 63/60

Czech Republic 58.9 60.6 62/60y8m 63y8m/63y4m 65/65

Denmark 61.6 61.3 65/65 65/65 67+/67+***

Germany 60.6 61.7 65/65 65y9m/65y9m 67/67

Estonia 61.1 62.1 63/61 63/63

Ireland 63.2 64.1** 65/65 65/65 (66/66) (68/68)

Greece 61.3° 61.4 65/60 65/60 65/65

Spain 60.3 62.6 65/65 65/65

France 58.1 59.3 60-65 60/60

Italy 59.8 60.8 65/60 65/60**** ***

Cyprus 62.3 63.5* 65/65 65/65

Latvia 62.4 62.7 62/62 62/62

Lithuania 58.9 59.9** 62y6m/60 64/63 65/65

Luxembourg 56.8 : 65/65 65/65

Hungary 57.6 : 62/62 64/64 65/65

Malta 57.6 59.8 61/60 63/63 65/65

Netherlands 60.9 63.2 65/65 65/65 (66/66) (67/67)

Austria 59.2 60.9* 65/60 65/60 65/65

Poland 56.6 59.3* 65/60 65/60

Portugal 61.9 62.6* 65/65 65/65

Romania 59.8 55.5 63y8m/58y8m 65/60 (65/61y11m) (65/65)

Slovenia 56.6° 59.8** 63/61 63/61 (65/65)

Slovakia 57.5 58.7* 62/59 62/62

Finland 61.4 61.6* 65/65, 63-68 65/65, 63-68

Sweden 62.1 63.8 61-67 61-67

United
62.0 63.1 65/60 65/65 68/68
Kingdom

EU 27 average 59.9 61.4

EN 30 EN
 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.

EN 31 EN
 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

65
% of respective age population

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.

EN 32 EN
 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

SI

FI

NL
IT

CZ

MT
DK

ES
BE

SE
DE

LV

EE

SK

CY
FR

RO

BG
EL

PL
LT

AT

PT
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.

EN 33 EN
 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*

-1

-2

-3

-4

-5

-6

-7
EE

BE

DE
FR

HU

DK

UK
BG

RO
ES

IE

SE

LU

SK
FI
EL

NL

CY
SI
PT

CZ

AT

LT

PL

IT
LV
MT

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 34 EN
 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

EN 35 EN
 EN

EN EN
 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}

EN EN
 TABLE OF CONTENTS

1. Description of EU legislation covering the pension pillars ......................................... 3

1.1. Social Security Regulation........................................................................................... 3
1.2. The IORP Directive...................................................................................................... 4
1.3. The Insolvency Directive ............................................................................................. 4
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............................................................................................................................. 4
1.5. The Life Assurance Directive ...................................................................................... 5
2. Related EU legislation and initiatives .......................................................................... 5
2.1. UCITS IV Directive ..................................................................................................... 5
2.2. Pre-contractual information disclosure ........................................................................ 6
2.3. Financial education ...................................................................................................... 6
2.4. Corporate Governance and remuneration policies....................................................... 7
2.5. Non-life Insurance Directive (health) .......................................................................... 7
2.6. Health policy ................................................................................................................ 7
2.7. The Gender Equality Directives................................................................................... 8
2.8. Taxation........................................................................................................................ 8
2.9. Statistics ....................................................................................................................... 9
2.10. EU-wide reviews.......................................................................................................... 9
3. CEIOPS mapping of EU prudential regulation.......................................................... 10
3.1. Statutory funded pension schemes/institutions .......................................................... 11
3.2. Occupational pension schemes/institutions................................................................ 11
3.3. Individual pension schemes/institutions .................................................................... 12

EN 2 EN
 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. DESCRIPTION OF EU LEGISLATION COVERING THE PENSION PILLARS

1.1. 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.

1
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
2
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.
3
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
4
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

EN 3 EN
 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

5
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.
6
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
7
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
8
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.

EN 4 EN
 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. RELATED EU LEGISLATION AND INITIATIVES

2.1. 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

9
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.
10
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.
11
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.
12
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.

EN 5 EN
 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
Pre-contractual information for financial services, January 2008, available at
http://ec.europa.eu/consumers/rights/docs/PCI_final_report_22Feb2008_en.pdf
14
Communication from the Commission on Packaged Retail Investment Products, 30.4.2009,
COM(2009) 204 final

EN 6 EN
 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

15
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
16
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.

EN 7 EN
 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

17
Survey of Health, Ageing and Retirement in Europe, Mannheim Research Institute for the Economics
of Aging (MEA), 2008
18
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).
19
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).
20
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).
21
The elimination of tax obstacles to the cross-border provision of occupational pensions, COM (2001)
214 final.

EN 8 EN
 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

22
Commission vs. Belgium, Case C-522/04, Commission vs. Denmark, Case C-150/04.
23
Case C-522/04.
24
Dividend taxation of individuals in the Internal Market, COM(2003) 810 final.
25
"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

EN 9 EN
 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 defined-
contribution 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.

26
"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

EN 10 EN
 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: n/a

– Life Directive: EE

– UCITS Directive: EE

– Banking Directive: n/a

– Investment Services (MiFID): n/a

– No EU prudential rules: BG, LV, LT, HU, PL, RO, SK

3.2. 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: BE, DK, DE, EL, LU, NL, AT, PL, PT

– UCITS Directive: PL

– Banking Directive: n/a

EN 11 EN
 – Investment Services (MiFID): n/a

– No EU prudential rules: - 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: IT, LV, RO

– Life Directive: BE, DK, DE, EE, IE, ES, FR, IT, CY, LT, LU, HU, NL

AT, PL, PT, SE, UK

– UCITS Directive: BE, DE, EE, LT, LU, HU, PL, PT

– Banking Directive: DE, LU, HU, PL

– Investment Services (MiFID): PL

– No EU prudential rules: BG, CZ, ES, HU, MT, PT, SI

EN 12 EN
 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 Types of Mandator Source EU

pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

BE IRP until DB, DC or Voluntary Occupational IORP

(Institutions 01/01/2012: mixed (b) (c)
de Retraite non-profit
Professionnell ASBL/VZW organisation
e)/
or or
IBP (Instelling
voor
AAM/OVV mutual
Bedrijfspensio
insurance
envoorziening
association
)

As from
01/01/2007:
Organisation
OFP for Financing
Pensions

entreprise société par limited same as voluntary Occupational Life

d’assurance/ actions/ partnership above or individual
verzekeringso vennootschap with a share through
nderneming op aandelen capital group
insurance
or
+
société cooperative individual
coopérative/ partnership life
insurance
coöperatieve
vennootschap

or

AAM
(Association mutual
d’Assurances insurance
Mutuelles)/ association

OVV
(Onderlinge
Verenigingsve
reniging)

fonds OPCVM/ICBE: UCITS: individual voluntary individual UCITS

d'épargne- SICAV/BEVEK open-end pensions
pension / investment savings
pensioenspaar (d) company
fonds

EN 13 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Book reserves DB/DC voluntary occupational Excluded

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

BG Пенсионно- Акционерно Joint Stock No DC Voluntary Occupational IORP

осигурително дружество Company (a) (b)
дружество

Пенсионно- Акционерно Joint Stock No DC Voluntary Individual (c) No EU

осигурително дружество Company (a) prudential
дружество legislation

Пенсионно- Акционерно Joint Stock No DC mandatory Statutory Regulation

осигурително дружество Company funded 1408/71
дружество (individual) and 574/72
(d)

CZ penzijní fond akciová joint-stock No DC voluntary Individual, No EU

společnost company although prudential
occupational regulation.
elements
possible (a)

DK Firmapensions Pensionskasse Company No DC or DB Mandatory occupational IORP

kasse Pension
Fund

Livsforsikrings Aktieselskab Life No DC or Voluntary/ Occupational/ Life

selskab Insurance unit- Mandatory individual
Company linked (a)

Tværgående Pensionskasse General No DC or Mandatory Life

pensionskasse Pension unit-
Funds linked

DE Pensionskasse Aktiengesellsc Joint-stock No Voluntary occupational IORP

haft company (a)

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

Anstalt des Institution

öffentlichen under public
Rechts law

EN 14 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Pensionsfonds Aktiengesellsc Joint-stock No Voluntary Occupational IORP

(b) haft company (a)

Pensionsfonds Mutual
verein auf pension fund
Gegenseitigkei association
t

Direktzusage No Voluntary Occupational Excluded

(book-reserve (c) from IORP
schemes) (b) Directive
based on
Art.2.2(e)

Unterstützung Gesellschaft Limited No Voluntary Occupational Excluded

skasse (b) mit liability (c) from IORP
beschränkter company Directive
Haftung based on
Registered Recital 16
Eingetragener association and Art.
Verein 2.2(d)
Foundation
Stiftung

Lebensversich Aktiengesellsc Joint-stock No Voluntary Occupational Life

erungs- haft company (a)
unternehmen
(Direktversich Versicherungs Mutual
erung – direct verein auf insurance
insurance) (d) Gegenseitigkei association
t
Corporation
Körperschaft under public
des law
Öffentlichen
Rechts

Anstalt des Institution

öffentlichen under public
Rechts law

Altersvorsorge No Personal Voluntary Individual Life,

vertrag pension Banking,
(contract) schemes UCITS

Basisrentenve No Personal Voluntary Individual Life,

rtrag pension Banking,
(contract) schemes UCITS

EE Vabatahtlik Lepinguline Contactual No DC Voluntary Individual UCITS+extr

pensionifond fond fund a
requirement
s

EN 15 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Kohustuslik Lepinguline Contactual No DC Mandatory Statutory UCITS+extr

pensionifond fond fund funded a
(individual) requirement
s

Elukindlustuss Aktsiaselts Joint Stock No DB or DC Voluntary Individual Life

elts Company (Unit-
linked)

Elukindlustuss Аktsiaselts Joint Stock No DB Mandatory Statutory Life

elts Company funded
(individual)

IE Occupational Trust Trust No DB/DC/H Voluntary Occupational IORP

Pension ybrid
Scheme (a) schemes
and Trust
Retireme
nt
Annuity
Contracts

Personal Contract Contract No Individual Voluntary Individual Life

pension Retireme
nt
Annuity
Contracts
/Personal
Pensions

Personal Contract Contract No Individual Voluntary Individual Life

Retirement retiremen
Savings t savings
Accounts accounts

EL ΤΑΜΕΙΑ Νοµικά Non-profit No Occupatio Voluntary Occupational IORP (b)

ΕΠΑΓΓΕΛΜΑΤΙ πρόσωπα private nal
ΚΗΣ ιδιωτικού entities with Insurance
ΑΣΦΑΛΙΣΗΣ δικαίου legal Funds
(Τ.Ε.Α.) (ν.π.ι.δ.) µη personality. (DC) (a)
κερδοσκοπικο
ύ χαρακτήρα.

ΑΣΦΑΛΙΣΤΙΚΕ Group Life (d)

Σ Insurance
ΕΠΙΧΕΙΡΗΣΕΙΣ Contracts
(c)

ES Fondo de Fondo de IORP No DC, DB, Voluntary occupational IORP

Pensiones de Pensiones de or mixed
empleo empleo

Fondo de Fondo de Personal No Individual Voluntary Individual (a) No relevant

Pensiones Pensiones Pension and prudential
personal personal Fund associate EU
d pension legislation
scheme applicable
(b)

EN 16 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Seguros Collective Life Collective No DB Voluntary occupational Life (in

colectivos Insurance Life general)
Insurance
Contract

PPSE Collective Life Collective No DB Voluntary occupational Life (in

(Employer Insurance Life general)
Social Insurance
Prevision Contract
Plan)

PPA (Prevision Individual Life Individual No DB Voluntary Individual Life (in

Plan Assured) Insurance Life general)
Insurance
Contract

FR assureur vie Société Stock DC/DB Occupational IORP (Art.

anonyme company or individual 4) or Life
(a) (b)
Or Or

Société Mutual
d’assurance insurance
mutuelle company

Institution de Institution de Paritarian DC/DB Occupational IORP (Art.

prévoyance prévoyance institution or individual 4) or Life
ruled by the (a) (b)
“social
protection
code”

« mutuelle » Mutuelle du Mutual DC/DB Occupational IORP (Art.

code de la company or individual 4) or Life
mutualité ruled by a (a) (b)
specific code

Voluntary Occupational IORP

IT Fondi Associazione/f Association/f No DC opting-
pensione ondazione oundation out
negoziali (a)

Fondi Voluntary occupational/

pensione Patrimonio di An No DC opting- Individual IORP
aperti (b) destinazione autonomous out/Volunt
autonomo pool of ary
istituito da assets
una società instituted by
finanziaria in a financial
modo company
separato separately
rispetto al from its own
patrimonio assets
della stessa

EN 17 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Voluntary occupational
Fondi Associazione/f Association/f No DC, DB opting- IORP
pensione ondazione oundation closed to out
preesistenti new
autonomi (c) members

Fondi Voluntary occupational

Fondi pensione Book reserve No DC, DB opting-out Excluded
pensione interni ai closed to from IORP
preesistenti bilanci delle new Directive
(non società members based on
autonomi) (d) promotrici Art. 2.2(e)

(d)

Associazione/f Association/ Mandatory Statutory

Enti privati di ondazione Foundation Yes DB/DC funded Regulation
previdenza 1408/71
obbligatoria
dei liberi
professionisti
(e)

Patrimonio di
Piani destinazione An No Voluntary Individual Life
pensionistici autonomo autonomous
individuali istituito da pool of
(Pip) (f) una assets
compagnia di instituted by
assicurazione an insurance
in modo company
separato separately
rispetto al from its own
patrimonio assets
della stessa

CY Ταµεία Νοµικά Provident No DC/DB Mandatory Occupational IORP

Προνοίας Πρόσωπα Funds - set up via or (a)
Ιδιωτικού Private collective Voluntary
∆ικαίου Entities with agreemen (determin
Legal ts ed by the
Personality rules of
each
provident
fund)

Ταµεία Νοµικά Pension No DB set up Mandatory Occupational IORP

Συντάξεως Πρόσωπα Funds – via (b)
Ιδιωτικού Private collective
∆ικαίου Entities with agreemen
Legal ts
Personality

Επενδυτικά Ασφαλιστικό Insurance No Unit Voluntary Individual Life

Ατοµικά Συµβόλαιο Contract Linked Opt Out
Σχέδια Ζωής Personal
Life
Contracts

Σχέδια Pay as you No DB Mandatory occupational Excluded

Συντάξεως (c) go pension from the
schemes IORP
Directive

EN 18 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Σχέδιο Book reserve No DB Mandatory occupational Excluded

Φιλοδωρήµατο from the
ς (d) IORP
Directive

LV Privātais Akciju Stock No DC/DB voluntary Occupational IORP (b)

pensiju fonds sabiedrība company and
individual (a)

Regulation
N/A State funded DC Mandatory Statutory 1408/71
pension , voluntary funded
scheme (c)

LT Pensijų Asociacija Association DC, DB Voluntary Occupational IORP

asociacija (a)

Gyvybės Akcinė Public Life Voluntary Occupational IORP (Art.

draudimo bendrovė/ limited assurance 4)
įmonė, Uždaroji liability contract
vykdanti akcinė company/Pri under
profesinių bendrovė/Eur vate limited which
pensijų opos liability occupatio
kaupimo Bendrovė company/Eu nal
veiklą ropean pensions
company are
(Societas accumula
Europaea) ted

Valdymo Akcinė Public No DC Voluntary Statutory Excluded

įmonė bendrovė/Užd limited funded from IORP
aroji akcinė liability Directive
bendrovė company/Pri based on
vate limited Art. 2.2(a)
liability
company/

Gyvybės Akcinė Public No DC Voluntary Statutory Excluded

draudimo bendrovė/ limited funded from IORP
įmonė Uždaroji liability Directive
akcinė company/Pri based on
bendrovė/Eur vate limited Art. 2.2(a)
opos liability
Bendrovė company/Eu
ropean
company
(Societas
Europaea)

Valdymo Akcinė Public DC Voluntary individual UCITS (b)

įmonė bendrovė/Užd limited
aroji akcinė liability
bendrovė company/Pri
vate limited
liability
company/

EN 19 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Gyvybės Akcinė Public Life Voluntary individual Life

draudimo bendrovė/ limited assurance
įmonė Uždaroji liability contract
akcinė company/Pri
bendrovė/Eur vate limited
opos liability
Bendrovė company/Eu
ropean
company
(Societas
Europaea)

LU Fonds de Sepcav and Pension No voluntary Occupational IORP

pension assep savings
(CSSF) (a) companies
with variable
capital and
pension
savings
associations

Fonds de Association Mutual No voluntary Occupational IORP

pension (CAA) d’assurances insurance
(b) mutuelles, associations,
société co-operative
coopérative, companies,
société co-operative
coopérative companies
organisée organized as
comme une a public
société limited
anonyme ou company,
association charitable
sans but associations
lucratif

Assurances de Enterprise Insurance No voluntary Occupational Life

groupe d’assurances / company/
Contrats Group
d’assurance insurance
groupe contracts

Régime NA NA No voluntary Occupational No relevant

interne de Provisions au Book- prudential
pension bilan reserve EU
schemes legislation
applicable

EN 20 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Contrat de Produits de Pension No voluntary Individual Life,

prévoyance- prévoyance- products Banking,
vieillesse vieillesse represented UCITS (c)
représentés by insurance
par des products as
produits well as by
d’assurance banking
ainsi que par products
des produits invested in
bancaires licensed
investis dans units for
des collective
organismes de investment
placement
collectif
agréés

HU magánnyugdíj magánnyugdíj Association- No DC (a) mandatory Statutory Regulation

pénztár pénztár like special funded 1408/71
legal form (individual)

önkéntes önkéntes Association- No DC voluntary Individual (b) No relevant

nyugdíjpénztá nyugdíjpénztá like special prudential
r r legal form EU
legislation
applicable

Nyugdíjbiztosí - életbiztosító - joint-stock No Pension voluntary Individual Life

tás (Life rt. company insurance
Insurance
company) - biztosító - association
egyesület

foglalkoztatói Foglalkoztatói Joint stock No DB/DC voluntary Occupational IORP

nyugdíjszolgál nyugdíjszolgál company
tatás tató rt.

nyugdíjelőtak pension No DC voluntary Individual Banking,

arékossági saving UCITS (c)
számla (c) account

MT Occupational Trust Trust No Trust Voluntary occupational IORP (c)

Retirement Deed (b)
Scheme Contractual Contractual
(a) Contract
between
the
employer
and the
Retireme
nt
Scheme
Administr
ator

EN 21 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Personal Trust Trust No Trust Individual (d) No EU

Retirement Deed prudential
Scheme Contractual Contractual legislation
(a) Contract
between
member
and the
Retireme
nt
Scheme
Administr
ator

NL Pensioenfonds Stichting Foundation No Mandatory Occupational IORP

(´pension (a) for (b)
fund´) industry-
wide
schemes

Voluntary
opt-out for
company
schemes

Verzekeraar Naamloze Public No Voluntary Occupational Life

(´insurance vennootschap limited (b)/individual
company´ or company
´insurer´)

AT Pensionskasse Aktiengesellsc Joint-stock No DB and voluntary occupational IORP

haften company DC

Betriebliche Aktiengesellsc Joint-stock No DB and voluntary occupational Life

Kollektivversic haften, company, DC
herung Versicherungs mutual
verein auf insurance
Gegenseitigkei association
t and SE and SE

Lebensindivid Aktiengesellsc Joint-stock No DB and voluntary Individual Life

ual- und haften, company, DC
Gruppenrente Versicherungs mutual
nersicherung verein auf insurance
Gegenseitigkei association
t and SE and SE

Direkte No DB/DC voluntary Occupational Excluded

Leistungszusa from IORP
gen (Book- Directive
reserve based on
schemes) Art 2.2(e)

EN 22 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

PL pracowniczy fundusz occupational No DC voluntary Occupational IORP (b)

fundusz emerytalny pension fund (a)
emerytalny (osoba (in Polish
prawna) legal
framework is
registered as
separate
legal entity)

zakład spółka joint-stock No DC voluntary Occupational Life

ubezpieczeń akcyjna company (a)
na życie

fundusz fundusz investment No DC voluntary Occupational UCITS

inwestycyjny inwestycyjny fund (in (a)
otwarty Polish legal
framework is
registered as
separate
legal entity

zarządzający Not specified No DC voluntary Occupational IORP (c)

zagraniczny – all form of (a)
IORPs
(foreign notified by
manager) relevant
authorities
from other
Member
States

Otwarty fundusz Open No DC mandatory Statutory Regulation

fundusz emerytalny pension fund funded 1408/71
emerytalny (osoba (in Polish
prawna) legal
framework is
registered as
separate
legal entity)

EN 23 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Indywidualne 1) Fundusz 1) No DC voluntary individual 1) UCITS

konta inwestycyjny, Investment
emerytalne fund -in 2) Life
2) Zakład Polish legal
ubezpieczeń framework is
3) Banking
na życie, registered as
separate
legal entity, 4) ISD
3) Bank,

2) joint-
4) instytucja
stock
prowadząca
company,

działalność
3) joint-
maklerską.
stock
company,

4) Limited
company or
joint-stock
company

PT Fundos de Fundos de Pension No DB / DC Voluntary occupational IORP

pensões pensões funds
fechados
(closed
pension
funds)

Adesões Fundos de Pension No DB / DC Voluntary occupational IORP

colectivas a pensões funds
fundos de
pensões
abertos
(collective
membership
of open
pension
funds)

Contratos de Contratos de Insurance No DB / DC Voluntary occupational Life

seguro de seguro policies
grupo (group
insurance
policies)

Planos de 1) Fundos de 1) Pension No DC Voluntary individual 1) No

poupança-refo pensões funds relevant EU
rma prudential
(saving-retire 2) Contratos 2) Insurance regulation
ment de seguro policies (a)
schemes)
3) Fundos de 3) Investme 2) Life
investimento nt funds
3) UCITS

EN 24 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Adesões Fundos de Pension No DC Voluntary individual No relevant

individuais a pensões funds EU
fundos de prudential
pensões regulation
abertos (b)
(individual
membership
of open
pension
funds)

Contratos de Contratos de Insurance No DC Voluntary individual Life

seguro seguro policies
individuais
(individual
insurance
policies)

Planos de No DB/DC voluntary occupational Excluded

pensões (c) from IORP
financiados no Directive
balanço da based on
empresa Art. 2.2(e)
(book-reserve
schemes)

RO Administrator Administrator Administrato No hybrid DC Mandatory Statutory Regulation

al unui fond ul unui fond r of a (a) funded 1408/71
de pensii de pensii privately (individual)
administrat administrat administrate
privat privat - d pension
Societate pe fund- joint
actiuni stock
company

Administrator Administrator Administrato Yes DC (b) Voluntary individual IORP (c)

de fonduri de ul de fonduri r of
pensii de pensii voluntary
facultative facultative - pension
Societate pe funds - joint
actiuni stock
company

SI Pokojninska Delniška Joint-stock No DC Voluntary Occupational IORP

družba družba company opt-out (a)

Zavarovalnica Delniška Joint-stock No DC Voluntary Occupational IORP

družba company opt-out (b)

EN 25 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Vzajemni Vzajemni Mutual No DC Voluntary Occupational IORP

pokojninski pokojninski pension opt-out, (c)
sklad sklad, fund, Mandatory
upravjavci: managed by for certain
banka, bank, occupation
zavarovalnica, insurance s
pokojninska company,
družba pension
insurance
company

Sklad Sklad Found No DC/DB Voluntary Individual No relevant

obrtnikov in prudential
podjetnikov EU
(SOP) legislation
applicable
to the
pension
product

SK dôchodková akciová joint stock DC Statutory Regulation

správcovská spoločnosť company (personal, funded 1408/71
No Voluntary
spoločnosť protected (individual) and 574/72
)

doplnková akciová joint stock DC Individual, in IORP

Voluntary,
dôchodková spoločnosť. company (hybrid, general (b)
No in general
spoločnosť unprotect
(a)
ed)

FI ETA- eläkesäätiö company No DB voluntary occupational IORP

lisäeläkesäätiö pension fund
(independen
t legal
entity)

ETA- eläkekassa industry- No DB voluntary occupational IORP

lisäeläkekassa wide pension
fund
(independen
t legal
entity)

SE Livförsäkrings Aktiebolag Proprietary No DC/DB Voluntary 1) 1) IORP

bolag life (a) Occupational (Art. 4)
insurance
company 2) individual 2) Life
(b)

Livförsäkrings Ömsesidigt Mutual life No DC/DB Voluntary 1) 1) IORP

bolag bolag insurance (a) Occupational (Art. 4)
company
2) individual 2) Life
(b)

Tjänstepensio Understödsför Occupational No DC/DB Voluntary Occupational IORP

nskassa ening pension fund (a) and
individual

EN 26 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Pensionsstiftel Stiftelse Pension No None, Voluntary Occupational IORP

se (c) foundation investme (a)
nts only

Särskild No DB Voluntary Occupational Excluded

redovisning av (a) from IORP
pensionsskuld Directive
(Book based on
reserves) (d) Art. 2.2(e)

UK Occupational Trust Trust (a) No DB Voluntary occupational IORP

DB scheme

Occupational Trust Trust (a) No DC Voluntary occupational IORP

DC scheme

Occupational Trust Trust (a) No DB/DC Voluntary occupational IORP

Hybrid (b)
scheme

Personal Contract Contract No DC Voluntary individual Life

pension
scheme

IS Lífeyrissjóður Sjóður Fund No DB/DC Mandatory Occupational No EU

and (a) and prudential
voluntary individual legislation

LI Pension Funds Stiftung Foundation Yes DB or DC Mandatory Occupational Regulation

(Pensionskass (a) 1408/71
e) collective and 574/72
foundatio
n or
captive
foundatio
n

Pensions Stiftung, Foundation, No DB or DC Voluntary Occupational IORP

funds (b)
(Pensionsfond Aktiengesellsc Limited biometric
s) haft, company, risk or
not
Europäische Societas
Aktiengesellsc europa, call for
haft, additional
Cooperative cover or
Genosenschaf society not
t
Societas
Europäische Cooperativa
Genossenscha Europaea
ft

EN 27 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Insurance Aktiengesellsc Limited No DC or DB Voluntary Occupational IORP

company haft, company, (Art.4)
(Versicherung
sunternehmen Genossenscha Cooperative
, direkte ft Society
Lebensversich
erung)

NO Foretakspensj 1) 1) Pension No DB It is occupational 1) IORP

ons-ordninger Pensjonskasse funds mandatory
r to have a 2) Life
3) Life DC or a
2) insurance DB
Livsforsikrings companies scheme
- selskaper

Innskuddspen 1) 1)Pension No DC It is Occupational 1) IORP

sjons- Pensjonskasse fund, mandatory
ordninger r to have a 2) IORP
2) Defined DC or a
2) contribution DB
3) Life
Innskuddspen pension scheme
sjons-foretak undertakings
4) Banking
,
3)
5) UCITS
Livsforsikrings 3)Life
-selskaper insurance
companies
4) Banker
4)Banks
5)
Forvaltningsse 5)
lskap for Companies
verdipapirfond which
manage
securities
funds

Individual 1) 1) Life No DC Voluntary Individual 1) Life

pension Livsforsikrings insurance
schemes selskaper companies 2) Banking

2) Banker 2)Banks 3) UCITS

3) 3) 4) IORP
Forvaltningsse Companies
lskap for which
verdipapirfond manage
securities
4) funds
Pensjonskasse
r 4) Pension
fund (e)

EN 28 EN
 Types of the private pension institutions Types of Mandator Source EU
pension y/ regulation
schemes voluntary • Statutory
Domestic Legal form Legal form Art. /
funded
name (domestic) (English) 3? • occupational
voluntary
Y/N • individual
opt-out

Statens Pension fund Statens DB Mandatory Occupational Excluded

Pensjonskasse Pensjonskas from IORP
se is a directive
pension fund based on
administerin Art. 2.2. (a)
g pension and/or (c)
schemes for
state
employees
and certain
other groups
of
employees

Book reserves Pension Usually voluntary Occupational Excluded

(a) schemes DB (b) from IORP
based on directive
contract based on
where the Art. 2.2. (e)
benefits are
paid by the
employer/un
dertaking

Pensjonsfond pension fund DB Mandatory Occupational Excluded

(c) if a from IORP
pension directive
fund as based on
mentioned Art. 2.2 (c)
is and/or (d)
establishe
d

pension funds pension DB Mandatory Occupational Excluded

schemes from IORP
fixed by law directive
for certain based on
occupational Art. 2.2(c)
groups (d)

pension fund Pension fund DB Mandatory Occupational Excluded

sponsored by for medical from IORP
State parctitioners directive
based on
Art. 2.2(c)

pension funds Pension DB Voluntary Occupational Excluded

sponsored funds from IORP
partly by the administratin directive
State g early based on
retirement Art. 2.2(c)
schemes

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:

EN 29 EN
 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)

EN 30 EN
 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 (defined-
contribution), “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).

EN 31 EN
 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.

EN 32 EN
 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.

EN 33 EN
 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.

EN 34 EN