92001E2415

WRITTEN QUESTION E-2415/01

by Glyn Ford (PSE) to the Commission

(5 September 2001)

Subject: Equitable Life and pensions

Equitable Life, a financial investment company in the UK, has had to review and, consequently, downgrade the amount its investors can expect to receive as a pension because of its poor investment strategy.

Thousands of people have thus seen the pension, which they have saved for over many years, considerably reduced.

Does the Commission plan to review the provision of pensions by private companies?

Does it envisage some form of regulation to ensure that pension funds are properly managed and on course to meet their targets, or at the very least that their value is not reduced, thereby leaving recipients badly off in their retirement?

Answer given by Mr Bolkestein on behalf of the Commission

(17 October 2001)

The Commission regrets that many policyholders may see a reduction in the expected benefits of their pensions policies as a result of the difficulties confronting Equitable Life. The Commission is aware that the British Government has announced that a full independent inquiry, headed by Lord Penrose, will be conducted into the circumstances leading to the current situation of Equitable Life. The Commission does not plan to review the provision of private pensions by life assurance undertakings.

The Commission has recently submitted a proposal for a directive of the Parliament and of the Council on the activities of institutions for occupational retirement provision(1). It is intended to apply to institutions operating on a funded basis for the purpose of providing retirement benefits on the basis of an agreement between the employer and the employees. It is not intended to apply to pension schemes taken out by individuals by contract directly with a product provider, usually a life insurance company, and where participation is not related to employment and the exercise of a profession.

One of the primary goals of the proposed directive is to establish a sound prudential framework for the regulation of pension funds to ensure that such funds are properly managed and their beneficiaries interests securely protected throughout the Community. The proposal, which is a priority of the Financial Services Action Plan, is still to be adopted by the Council and Parliament.

(1) OJ C 96 E, 27.3.2001.