The Draft Pension Funds Directive and the Financing of Pensions in the EU

Abstract

The European Commission's draft pension funds directive was a prudent first step towards achieving more convergence in the structure and financing of occupational pensions in the EU. The directive would have liberalised the investment and management of pension fund assets in the EU. Despite the fact that the directive was limited in scope, the discussions that did take place and the final outcome have shown that pensions are a very delicate matter, and that the EU's interference in the field is scarcely be tolerated. The proposal was finally withdrawn, and the experience might keep the Commission from further harmonisation in this field for some time to come. One reason for their sensitivity is that pensions are closely linked with the whole institutional set-up of nation-states and one cannot intervene in this field without touching on elements of social policy, public finance and taxation, elements that are largely a national competence. The aim of this article is firstly to discuss the structure of pension systems and their financing in Europe. A second part will examine the problems that pensions pose from a European point of view and look at the approach of the European Commission. A third part assesses the negotiations on the draft pension funds directive, and future policy priorities are discussed in a fourth part. Some general conclusions are drawn at the end.