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Generation 2004’s position on pensions

[1]First, Generation 2004 welcomes the debate with U4U, which so far seems to be the only staff organisation in the ongoing electoral campaign in Brussels, besides Generation 2004, capable of coming up with clear and unambiguous positions on a range of topics. As far as pensions are concerned, we note the following interesting points made by U4U [2]:

  1. U4U’s position is to defend acquired rights at all costs
  2. U4U argue that our pension scheme is fair to everyone
  3. U4U argue that our pension scheme is sound
  4. U4U recognises (end of their document) that “The worsening outlook for pay changes and career prospects and consequently the foreseeable decrease in pensions following the revisions of the Staff Regulations in 2004 and 2014 has already resulted in a fall in the contribution of active workers to the pension scheme (from 11.6% to 9.8% for employee contributions…)“.

On the first point, fair enough. There is some logics to fight for acquired rights. But the counterpart of this logic is that those who have much reduced “acquired rights” are perfectly legitimate to ask for a modification of the status quo. Since the administrative budget that pays our pensions is not going to grow, those who have less should fight to rebalance the budget in their favour. As mentioned in our manifesto [3], Generation 2004 demand a re-balancing in favour of “the many, not the few”, even if that means that some acquired rights will have to be reduced.

On the second point, Generation 2004 has to disagree: our pension scheme is not fair to everyone. Just think about the annual accrual rate of pension rights. Some people collect 2% per year, others 1.9% and the rest 1.8%. Is that fair? No! If you are still in doubt, think about the several thousand Contract Agents with 6-year contracts who do not have access to our pension scheme because they will not be able to stay in the Institutions for 10 years. That is not fair, is it?

Third point, our pension scheme is sound. Yes and no! From a legal point of view, it is sound, just read U4U’s arguments to convince yourself. From a political point of view [4], it is not sound. Firstly, the total pension liability, i.e. the amount of money that Member States are expected to pay us in the foreseeable future is gigantic, on the order of €70 billion. Unlike the UN institutions which have provisioned on the order of $40 billion for the pensions of their staff, the EU institutions have not provisioned anything. Our pension scheme is a virtual one, all we have is a promise by the Member States that they will pay our pensions when we retire. What happens if the EU collapses or in the case of the UK, if one country leaves is unclear. Yes, the UK has accepted to pay its share of the liability, but this is subject to a positive vote of its parliament. Nobody knows at this stage if the UK parliament will accept to honour the UK share of the pension liability (close to €10 billion). Secondly, the annual disbursement from the EU budget to pay for the pensions of the colleagues who have already retired is going through the roof. We reckon that it will catch up with our salaries in the next decade or so. Why? Because the current pensioners have for most of them retired with very high pensions and their numbers are growing exponentially (pension expenditure goes up by 5-7% /year at the moment!).

Fourth point, we fully agree with U4U! However, what U4U forgets to mention is that those who have the highest salaries have benefitted most from the decrease in the pension contribution.

Last point: one does not need to open the Staff Regulations to change the tax rates applied to pensions. The tax rates are set by the protocol of immunities which has been left untouched since 1968.  High pensions could be taxed by changing this protocol; if a proper abatement is given to active staff, they will be unaffected by the change. The same method can be applied to spare the lower pensions. Why do we propose this change in the tax regime for pensions? Because the product of the taxation of high pensions can then be used to fund the capital-based pension scheme that Commissioner Oettinger wants to put in place. This capital-based scheme would be most useful for anyone who does not want to or cannot stay in the institutions until the end of their career, and thus in particular for the CA3bs who cannot stay for more than 6 years under the present Staff Regulations.