The European Parliament has adopted the disputed Directive on supplementary pension rights, lowering the vesting period for accrual of pension benefits to three years across the single market.

László Andor, commissioner for social affairs, said it was “vital” to ensure that workers were not penalised when they moved across member state borders.

“This Directive complements the protection of state pension rights by ensuring that occupational pension rights are guaranteed after a limited period and that they are preserved when people move to another member state.”

First proposed by the European Commission in 2005, attempts to introduce the then-Portability Directive were abandoned after a 2007 revision failed to receive the required support.

It was finally revived last year after internal markets commissioner Michel Barnier announced that the revised IORP Directive would not introduce capital requirements.

The agreed proposal will now see a minimum vesting period of three years introduced, starting for workers no later than 21 years of age, with a requirement for deferred and active members to be offered the same rights – such as indexation.

Member states must now adopt measures to ensure that deferred and survivors’ benefits “are treated in line with the value of the rights of active scheme members or the development of pension benefits currently in payment” – either safeguarding the nominal value, adjusting the value in line with increases offered to active members, or offering indexation against salary and inflation increases.

The reduction of the vesting period to three years will impact a number of member states including Germany, where it currently stands at five years.

Withold Galinat, vice-president of benefits policies & coordination at German chemical group BASF SE, last month told the Handelsblatt occupational pensions conference in Berlin that the Directive was “dispensable and unattractive”.

Mercer Germany’s head of international retirement Stefan Oecking previously complained that attempts to amend a member state’s stance on vesting rights was “contrary to the subsidiarity principle” of the European Union.

The UK’s National Association of Pension Funds was less concerned with the changes, telling IPE that the UK already complied with the rules.

James Walsh, policy lead for EU and international matters at the association, said: “The NAPF now looks forward to this being adopted by the Council of Ministers and becoming a full directive.”

Topics