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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country
Flags of the EU member states flutter in the air near a statue of the Euro logo outside the European Commission building in Brussels, on May 28, 2020. (Photo by Kenzo TRIBOUILLARD / AFP)

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

Member comments

  1. The cap of 1% fees is welcome but frankly way too high. If you compare to the fees charged by Vanguard or Fidelity in the US you can see how even 1% over the savings lifetime of 30-40 years is a real gouge. This is plain vanilla arithmetic. I have a managed individual retirement account at Vanguard in the US that charges me .16%. And note that is a managed fund. The purer index funds, which simply track the whole market whether bonds or shares, are even less costly.

  2. I have been paid a complementary pension by Agirc-Arrco ( after much difficulty trying to claim it during the pandemic). I received it ( I thought ) under the terms of the Brexit Withdrawal Agreement ( financial section) which states that a person should not be worse off re their financial situation ( french complementary pension) after Brexit. Although I lived and worked in France for
    Ten years and accumulated many points in the scheme…for which I have been paid monthly…now they have blocked my
    account due to completely ambiguous wording of the INFO RETRAITE formulaire which I used for instructions in sending my certificat de Vie. I am 68 years old and worked hard years to accumulate this pension….who to speak to ? I am hoping that the French state part of my pension will be paid as usual as that account isn’t blocked. Any help appreciated.
    .

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TRAVEL NEWS

EXPLAINED: Which Schengen area countries have border controls in place and why?

Borders within Europe's Schengen area are meant to be open but several countries have checks in place but are they legal and will they be forced to scrap them? Claudia Delpero explains the history and what's at stake.

EXPLAINED: Which Schengen area countries have border controls in place and why?

The European Court of Justice has recently said that checks introduced by Austria at the borders with Hungary and Slovenia during the refugee crisis of 2015 may not be compatible with EU law.

Austria has broken the rules of the Schengen area, where people can travel freely, by extending temporary controls beyond 6 months without a new “serious threat”.

But Austria is not the only European country having restored internal border checks for more than six months.

Which countries have controls in place and what does the EU Court decision mean for them? 

When can EU countries re-introduce border checks?

The Schengen area, taken from the name of the Luxembourgish town where the convention abolishing EU internal border controls was signed, includes 26 states: the EU countries except for Ireland, Bulgaria, Cyprus, Croatia and Romania, plus Iceland, Norway, Lichtenstein and Switzerland, which are not EU members.

The Schengen Borders Code sets the rules on when border controls are permitted. It says that checks can be temporarily restored where there is a “serious threat to public policy or internal security”, from the organisation of a major sport event to a terrorist attack such as those seen in Paris in November 2015.

However, these checks should be a “last resort” measure, should be limited to the period “strictly necessary” to respond to the threat and not last more than 6 months.

In exceptional circumstances, if the functioning of the entire Schengen area is at risk, EU governments can recommend that one or more countries reintroduce internal border controls for a maximum of two years. The state concerned can then continue to impose checks for another six months if a new threat emerges. 

Which countries keep border checks in place?

Countries reintroducing border controls have to notify the European Commission and other member states providing a reason for their decision. 

Based on the list of notifications, these countries currently have controls in place at least at some of their borders: 

Norway – until 11 November 2022 at ferry connections with Denmark, Germany and Sweden. These measures have been in place since 2015 due to terrorist threats or the arrival of people seeking international protection and have sometimes extended to all borders.

Austria – until November 2022 11th, since 2015, at land borders with Hungary and with Slovenia due to risks related to terrorism and organised crime and “the situation at the external EU borders”. 

Germany – until November 11th 2022, since November 12th 2021, at the land border with Austria “due to the situation at the external EU borders”.

Sweden – until November 11th 2022, since 2017, can concern all borders due to terrorist and public security threats and “shortcomings” at the EU external borders. 

Denmark – until November 11th 2022, since 2016, can concern all internal borders due to terrorist and organised criminality threats or migration.

France – until October 31st 2022 since 2015, due to terrorist threats and other events, including, since 2020, the Covid-19 pandemic.

Estonia – until May 21st 2022, from April 22nd 2022, at the border with Latvia “to facilitate the entry and reception of people arriving from Ukraine”.

Norway, Austria, Germany and France also said they are operating checks on non-EU citizens. 

Can Schengen rules survive?

Despite the exceptional nature of these measures, there have been continuous disruptions to the free movement of people in the Schengen area in the past 15 years. 

Since 2006, there have been 332 notifications of border controls among Schengen countries, with increasing frequency from 2015. In addition, 17 countries unilaterally restored border controls at the start of the pandemic. 

In December 2021, the Commission proposed to reform the system to ensure that border controls remain an exception rather than becoming the norm. 

According to the proposals, countries should consider alternatives to border controls, such as police cooperation and targeted checks in border regions. 

When controls are restored, governments should take measures to limit their impacts on border areas, especially on the almost 1.7 million people who live in a Schengen state but work in another, and on the internal market, especially guaranteeing the transit of “essential” goods. 

Countries could also conclude bilateral agreements among themselves for the readmission of people crossing frontiers irregularly, the Commission suggested. 

If border controls have been in place for 6 months, any notification on their extension should include a risk assessment, and if restrictions are in place for 18 months, the Commission will have to evaluate their necessity. Temporary border controls should not exceed 2 years “unless for very specific circumstances,” the Commission added. 

At a press conference on April 27th, European Commissioner for Home Affairs Ylva Johansson said the EU Court ruling about Austria is in line with these proposals.

“What the court says is that member states have to comply with the time limit that is in the current legislation. Of course we can propose another time limit in the legislation… and the court also says that it’s necessary for member states, if they would like to prolong [the border controls] to really do the risk assessment on whether it’s really necessary… and that’s exactly what’s in our proposal on the Schengen Border Code.”

Criticism from organisations representing migrants

It is now for the European Parliament and EU Council to discuss and adopt the new rules.

A group of migration organisations, including Caritas Europe, the Danish Refugee Council, Oxfam International and the Platform for International Cooperation on Undocumented Migrants (PICUM) have raised concerns and called on the EU institutions to modify the Commission proposals.

In particular, they said, the “discretionary nature” of controls in border regions risk to “disproportionately target racialised communities” and “practically legitimise ethnic and racial profiling and expose people to institutional and police abuse.”

Research from the EU Fundamental Rights Agency in 2021, the groups noted, shows that people from an ‘ethnic minority, Muslim, or not heterosexual’ are disproportionately affected by police stops.

The organisations also criticize the definition of people crossing borders irregularly as a threat and a new procedure to “transfer people apprehended… in the vicinity of the border area” to the authorities of the country where it is assumed they came from without any individual assessment. 

The article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.

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