Page 20 - IrishPensions Spring Edition

Irish Pensions Magazine Spring 2013 20
Renewed European Council Negotiations on
the Portability Directive
Negotiations have renewed on the Portability Directive
after 5 years of inactivity. The Directive aims to protect
supplementary pension rights when an employee
changes employers. The Irish government, which
currently holds the rotating EU presidency, said that
it aims to broker a political agreement in Council by
June. The renewed negotiations come on the back of
a push by the EC to get the Member States to agree
on the issues that prevented adoption of the proposal
in 2007. Among them are the minimum age, the
vesting period, the waiting period and the legal basis
of the Directive. The basis for the new negotiations
is the Commission’s 2007 proposal, which technically
does not propose any “portability” of pension rights.
Rather than proposing the actual transfer of pension
assets from one pension plan to another, it aims to set
out rules to ensure the fair treatment of pension rights
built up by members who have left a pension plan,
compared to active plan members. The proposal sets
out minimum rules on the acquisition and preservation
of supplementary pension rights.
The vesting period is the period of active scheme
membership that is needed to trigger entitlement
to a supplementary pension. Vesting periods vary
across Member States, and the Council failed in
2007 to agree on an EU-wide vesting period. The
Council could not find unanimous agreement on the
proposal to make the vesting period 1 year for scheme
members over 25 years of age. The EC proposed to
cap the minimum age for joining a supplementary
pension scheme at age 21 and to limit the waiting
period before a new employee can join the scheme
to 1 year at the most. These periods are the basis for
the new round of negotiations. The EC’s reasons for
pushing new negotiations include the need to improve
worker mobility as a means to tackle unemployment in
the EU and the growing importance of supplementary
pensions in retirement provision. One of the 20
initiatives in last year’s EC White Paper on Pensions
also stated that it would resume work on the Directive.
Decision on the VAT exemption for pension
fund investment services – The Wheels Case
The European Court of Justice delivered a Judgment
on 7 March 2013, which provides that a defined
benefit pension scheme is not a special investment
fund and, therefore, investment management services
to pension funds should be VAT taxable. In 2007, the
European Court of Justice decision in the JP Morgan
Claverhouse case established that investment trusts
were special investment funds and should be exempted
from paying VAT on investment management services.
Based on the JPMorgan Claverhouse decision, in 2008
the UK National Association of Pension Funds (NAPF)
and the English Wheels Common Investment Fund
(WCIF) initiated the “Wheels case” before the CJEU.
The issue in dispute was based on the interpretation
of the exemption provided in art. 135 of the EU VAT
Directive, which states that the “management of special
investment funds as defined by Member State” is VAT
European Update
by David Fox
News