Social protection is not subject to the four freedoms: free movement of capital, goods, people and services. Member States can therefore use territorial elements in defining the scope of their social security schemes: i.e. restrict them to citizens working or residing in that State. This is always subject to the proviso that there is no overt or covert discrimination on the grounds of nationality. This principle is laid down expressly in Article 3 of Regulation 1408/717, which states that individuals residing in the territory of one of the Member States to whom the provisions of the Regulation apply, should be subject to the same obligations and enjoy the same benefits under its legislation as the nationals of that State.
Member States are completely free to decide who is to be insured; what benefits should be granted and under what conditions; how many contributions should be paid; how benefits should be calculated and for how long they should be granted. As national schemes have evolved over time and reflect national ideals, politics and historical background, any attempt to harmonise the social security schemes will be a lengthy operation.
The EU Institutions and their Role in Pensions Legislation
The Council
The Council is the political and legislative organ of the EU, representing the interests of each Member State. It is the principal and ultimate decision-making body of the EU. The Council has no fixed composition and its membership varies according to the subject under discussion. For example, when social policy matters are being discussed, a civil servant at the appropriate level or a minister from the DSS will attend, depending on the importance of the matter under discussion. The Council can initiate legislation, though it often delegates the responsibility to the Commission who will issue proposals on the Council’s behalf.
The Commission
The Commission is the initiator and co-ordinator of EU legislation. It supervises both the application and the implementation of Community legislation. The Commission comprises 20 Commissioners from the different Member States, with the larger countries, such as the UK, being represented by 2 Commissioners. The Commission is supported by its own civil servants who are organised into Directorates-General (DG).
The Commissioner who deals with Social Affairs is Padraig Flynn from DGV, and the financial and regulatory aspects of pensions are dealt with by DGXV, the Internal Market and Financial Services Directorate-General. The Commissioner there is Mario Monti, who is currently examining the whole area of supplementary (occupational) pensions and the barriers to cross border pension funds in the EU. New proposals in these areas are due in the spring of 1999.
The European Parliament
The European Parliament is the only directly elected EU institution and has 627 MEPs. The UK has 87 MEPs. Elections take place every 5 years, with the next ones due in June 1999.
Under the co-decision procedure introduced by the Treaty of Maastricht, the Parliament expanded its role scrutinising proposed legislation to new areas. Further areas, such as proposals on social policy, will be added when the Treaty of Amsterdam is ratified later this year. The co-decision procedure gives the Parliament more say in the passage of a proposal. If the Council does not accept its proposed amendments after the Second Reading of the proposal, a Conciliation Committee, consisting of equal numbers of members of the Council and the European Parliament, is formed to try to agree a joint text. As Parliament retains the ultimate power of veto, there is a powerful incentive for the Council to agree. This procedure has only failed to reach agreement three times since its introduction in 1993.
The European Court of Justice
National courts, in cases where any question of Community law arises, may make a reference for a preliminary ruling under Article 177 of the EC Treaty to the European Court of Justice ("the ECJ") to clarify any such points. In cases where the case is being heard by a Member State’s last court of appeal there is an obligation to refer points of Community law that have a direct bearing on the case.
The ECJ is committed to upholding the provisions of the Treaty and the four essential freedoms: free movement of goods, services, capital and people. This always underpins any opinions and judgements that are given by the Court. Major pension cases referred to the ECJ by the UK include Coloroll, Barber and more recently Magorrian. These all dealt with the area of sex discrimination in relation to different aspects of pension schemes. The Court found that equal treatment must be applied to men and women, full and part time workers, as required by Article 119 of the EC Treaty. Workers should receive equal pay for equal work and as pensions are considered as an element of pay they come under Article 119.
A new Article 6a has been inserted in the Treaty of Amsterdam, to combat discrimination on the grounds of sex, racial or ethnic origin, religion or belief, disability age or sexual orientation. Sexual orientation is an area that the ECJ refused to expand on recently, in Grant v. South-West Trains8. It ruled that the applicant had been treated no differently to the way a man would have been treated in a same sex relationship, and that there was therefore no discrimination. The Court ruled that it was for Member States to introduce legislation to combat discrimination on the grounds of sexual orientation.
EU Pensions Legislation
Regulations
The main rules for the co-ordination of pension provisions are contained in Regulations. Regulations are directly applicable in all Member States and require no further national legislation to put them into effect. In the event of a conflict between a Regulation and national law, the Regulation prevails. The Regulations in force that are applicable to pensions are:
- Regulation 1408/7 9 contains the main rules of co-ordination of pension provision;
- Regulation 574/72 10 contains the provisions on the practical implementation of these rules;
- Regulation 1390/81 11 extended the scope of Regulation 1408/71 on 1 July 1982 to self-employed persons
- Regulation 3795/81 12 extended the scope of 574/72 to self-employed persons
- Regulation 1606/98/EC 13 extends Regulation 1408/71 to cover special schemes for civil servants and enters into force on 25 October 1998.
Directives
Directives are binding on Member States as to the result that has to be achieved, within a stated period, but they leave the method of implementation to the discretion of the national governments. There is usually a period of about 18 months for national governments to ensure that their national legislation meet the provisions of the Directive and if not, new legislation has to be introduced.
The Directives in force that apply to pension provision are as follows:
- Directive 75/117/EEC 14 ensures equal pay for men and women doing the same work.
- Directive 76/207/EEC 15 ensures equality of treatment for both men and women in many work-related areas, including pensions.
- Directive 79/7/EEC 16 deals with equality of treatment for men and women under occupational social security schemes.
Recently Adopted Directives not yet Implemented by the UK
- Directive 98/50/EC 17 (amending Directive 77/187/EEC on safeguarding employees’ rights in the event of transfers of undertakings) was adopted on 29 June 1998 and gives Member States until 17 July 2001 to comply with the Directive. Occupational pension schemes are brought within the scope of the Directive for the first time.
- Directive 98/49/EC 18 on supplementary (occupational) pensions for migrant workers was adopted on 25 July 1998 and gives Member States until July 2001 to comply with the Directive. The aim of the Directive is to protect the rights of members of supplementary pension schemes (i.e. those belonging to occupational pension schemes or funded schemes) when they move from one Member State to another.
- Directive 98/52/EC on the burden of proof in sex discrimination cases
The EU Council adopted Directive 97/80/EC19 on the burden of proof in sex discrimination case in December 1997. Following the UK’s wish to accept Directives already adopted under the Agreement on social policy, the above Directive has been amended by Directive 98/52/EC20 to apply to the UK. Measures must be introduced by 22 July 2001 to ensure that where a complainant in a case of sexual discrimination can establish facts from which a presumption of discrimination (direct or indirect) can be drawn, the burden of proof will pass to the respondent.
7 OJ L 149 5 July 1971
8 Case C- 249/96
9 See 1. above
10 OJ L 074 27 March 1972
11 OJ L 143 29 May 1981
12 OJ L 378 8 December 1981
13 OJ L 209 25 July 1998
14 OJ L 74 27 March 1972
15 OJ L 39 14 February 1976
16 OJ L 6 10 January 1979
17 OJ L 201 17 July 1998
18 OJ L 209 25 July 1998
19 OJ L14/7 20 January 1998
20 OJ L205/66 22 July 1998
For further information please contact Jane Marshall
e-mail: jane.marshall@hammondsuddards.co.uk
7 Devonshire Square, Cutlers Gardens, London EC2M 4YH
Tel: 0171 655 1000