By: Sander Kramer

Cross-border pension in the EU:

the procession of Echternach



Our pensionland is in a state of flux; especially when it comes to the regulation of cross-border pensions.  On 17 January, the Lower House debated the Future Pensions Act (WTP). It is surprising that in the more than 100 hours of parliamentary debates and many hundreds of pages of parliamentary discussion, hardly any attention was paid to the cross-border aspects of our future pension or the impact on European pension legislation. This might give the impression that there are no border effects, but nothing could be further from the truth. The problems are many, of which cross-border value transfer and the small number of cross-border institutions for occupational retirement provision (IORPs) are just two.

On 16 November 2023, the Court of Justice of the European Union twice ruled against the Netherlands in cases concerning international individual value transfer of pensions when changing jobs (CJEU C-360/22 and CJEU C-459/22). The European Commission referred these cases to the Court in 2022 because the Netherlands continued to resist and showed an unprecedented immutability for the Netherlands. The Court ruled that two of the Dutch conditions for entitlement to value transfer of the accrued pension were an obstacle to the free movement of workers. The Netherlands cannot appeal these ECJ rulings. State Secretary of Finance Van Rij has indicated he will make the required adjustments to the Pensions Act and tax laws and regulations. If the state secretary delivers on his promise, it will be another small step towards freer movement of workers, where cross-border pensions should be as simple as a domestic situation.

Around the same time that the Court issued its ruling, the European Insurance and Occupational Pensions Authority (EIOPA); the European ‘pension regulator’, released its report on the development in cross-border activity between institutions for occupational retirement provision (IORPs) within the European Economic Area (EEA). The data shows that the number of cross-border IORPs operating in Europe remained low and unchanged from the previous year, with only 31 IORPs operating across borders. This reading confirms the continuation of a decades-long trend where the number of cross-border IORPs is no longer increasing. These findings, combined with no evidence of an upturn in the near future, suggest that the IORP Directive’s original objective of fostering a robust single market for supplementary pensions remains unfulfilled.

As long as competence over the design of national pension systems rests with member states and border effects are not given sufficient attention, cross-border pensions will be realised at the pace of the Echternach procession (three steps forward and two steps back). It is disappointing that in a historic change to such an important national working condition as pensions, the cross-border worker seems to be forgotten. The European Commission will need to take considerably more steps to bring cross-border pensions to maturity in the EU. A more overarching communication will be needed to reverse the regression of member states. At the national level, however, more attention is also needed during the parliamentary process regarding the cross-border effects of our pension.