The European Commission adopted on Thursday a package of measures to help citizens secure an adequate income during retirement. And among Brussels’ recommendations to member states is that all workers have access, by default, to a private pension plan within companies. In any case, if the worker does not wish it, he can express it and not join. It would involve launching the system known as self-registration, defended by the financial sector and which in Spain, so far, has been rejected several times, considering it unconstitutional.
Specifically, Brussels’ request, which is part of the Commission’s strategy for the Savings and Investment Union (SIU), advises States to “apply, in accordance with national circumstances and in full respect of the role and autonomy of the social partners and the prerogatives of collective bargaining, automatic enrolment, i.e. the automatic inclusion of workers in supplementary pension plans, with full freedom so that people can choose not to participate”.
This would, in practice, mean that when a company contracts a worker, it automatically places them in a workplace pension plan (those managed collectively within companies) and, only if the worker says they do not agree, they may not be enrolled in the plan.
According to Brussels, the implementation of these systems “will be guided by existing good practices in the EU and lessons learned from other countries”. There is no unified model in the Union self-registration, But some countries have systems of this type, such as Italy – where since 2007 a part of the severance pay is automatically allocated to a pension fund, provided the worker agrees –, Lithuania, Poland or, more recently, Ireland. Even in Germany there is a certain degree of automation of sectoral pension plans, especially in industry. Although the most widespread and well-known system of automatic assignment of workers to collective pension systems in companies in Europe is that of the United Kingdom.
The Spanish case
This clear commitment from the Commission to the second pillar of social protection – the first being public pensions; the second is collective pension plans within companies, called employment plans in Spain; and the third, private individual pension plans – is surprising if you take into account the emphasis with which Brussels always defends public pension systems. And, in the Spanish case, it could be particularly contentious, since lawmakers have ruled it out multiple times during pension reform negotiations conducted over the past two decades. The reason for the refusal is basically that the automatism may not fall within the Spanish Constitution, despite the banks and the pension plan industry arguing that guaranteeing the worker not to enroll in these plans if he declared it would exceed unconstitutionality.
In the latest pension reform, the former Minister of Social Security, José Luis Escrivá, designed and launched the Pension Fund for Employment and Public Promotion (FPEPP), intended to encourage the second pillar of the system, promoting sectoral plans aimed fundamentally at small businesses, self-employed workers and public administrations. But the one known as Escrivá macro fundformally started in 2022, it currently does not have a single euro deposited. Precisely from the financial sector they attribute the failure of this public promotion fund to the fact that there is no system self-registration which forces companies to automatically enroll their workers in a collective private plan.
At the moment, only the construction sector in Spain has implemented, through collective agreement, the incorporation of all workers of companies in the sector to an employment pension plan. However, it has been established exclusively in the private sector, apart from the He will write macrofund.
The Commission’s reasons
Brussels justifies that this recommendation “is a way to increase participation in supplementary pension plans and unlock a greater scale of supplementary pension markets”; and then insist that this measure, among others, “is intended to complement, and not replace, public pensions, which are the basis of pension systems in all Member States”.
The Commission continues to explain that demographic changes and labor market dynamics “require the adaptation of pension systems” and, in this framework, “supplementary pensions, both work pension plans and personal pension plans, can help citizens to further diversify their income during retirement, improving their financial security and stability once in retirement”.
Specifically, Brussels assures that with this recommendation more thought is given to the most vulnerable groups and women whose pensions in many cases will not be sufficient to maintain an adequate standard of living. And let’s remember that the gender gap in pensions between men and women is currently 24.5%.
To facilitate the implementation of the measures adopted on Thursday, the Commission is proposing a legislative reform to amend the Occupational Pension Funds Directive, as well as the Pan-European Personal Pension Product (PEPP) Regulation.
