THE EU GREEN PAPER ON PENSIONS – A VISION OF THE FUTURE?

On 7 July 2010, the EU Commissioner for Employment, Social Affairs and Inclusion
officially launched the EU’s Green Paper on pensions. The Green Paper is not a
statement of planned policy but rather is intended to seek opinions and encourage
debate about what should be done on a European level to address pension issues. The
consultation period on the paper will be open until 15 November 2010, after which time
the European Commission will analyse all responses and consider the best course for
future actions to address these issues at EU level’. If all goes well, the European
Commission may release a Pensions White Paper at the end of 2010 or beginning of
2011 that will form the basis of EU pensions policy over the coming years. The stakes
are high and the scope of the Green Paper is wide.

Reviewing the European pensions framework

The Green Paper is intended to review the European pensions framework in its entirety, covering
economic and social policy and financial regulation.

The paper addresses five distinct issues concerning pensions and pension providers:
To ensure adequate and sustainable pensions
To address the appropriate retirement age (working life/retirement balance)
To enable portable and cross-border pensions, removing obstacles to people who work in
different EU countries and improving the conditions for pan-European pension plans
To make pensions safer, possibly by improving the solvency regime and by establishing EU-
wide benefit guarantees
To make pensions more transparent, enabling people to have a clear idea of the status of
their pensions and for defined contribution participants to take informed decisions on their
investments.

Although the paper itself does not yet make any specific suggestions, its remit is broad and indicates
the probable direction of EU policy to come. As always, however, the devil lies in the detail and we
can expect some vigorous negotiation not only between member states and the EU but also
between Commission departments.

What’s at stake?
The European Commission has clearly indicated the three main challenges being faced by the
member states: demographic ageing, ongoing pension reforms, and the impact of the economic
crisis. In addressing these issues, the EU is keen to minimize the negative consequences of reform
(disruption and over-regulation) while maximizing the positive consequences (making the delivery of
pensions more efficient, introducing more choice and competition). For example, amendments to the

1 September 2010
EU Institutions for Occupational Retirement Provision (IORP) Directive are suggested in order to
address the legal issues and regulatory differences (covering governance, risk management, the
safekeeping of assets, investment rules and disclosure) that have hindered the creation of pan-
European pension plans. At the same time, the Commission wishes to make pensions more secure
and points to the Solvency II regulations as being a ‘good starting point’ for solvency regimes for
pension funds. Other measures suggested are an EU-wide pension benefit guarantee and increased
protection in case of employer insolvency.

Not ‘holistic’ or ‘integrated’ enough?

Although the European Commission describes the Green Paper as being ‘holistic’, or taking an
‘integrated approach’, there are some important gaps in the subjects it raises for discussion. For
example, the Green Paper does not raise the issue of how different EU rules fit together from the
perspective of pension providers that use different types of regulated entity to provide pension
services (for example, an insurer with separate pension funds and asset management vehicles) or
the optimal way to supervise such complex entities. In addition, cross-border pensions are about
more than just the IORP directive, yet the Green Paper’s question on this issue focuses purely on
potential improvements to the directive and leaves out the wider issues. All eyes are on the
Commission to see how it responds after 15 November 2010.

More information
The full Green Paper on Pensions, a summary version and Q&As are available at the European
Commission’s website.

For a full list of the questions raised by the European Commission in the Green Paper, you can view
the full questionnaire.

2 September 2010