PENSION SCHEMES AND BASIC STATE PENSION

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					1 PENSION SCHEMES AND BASIC STATE PENSION

Working group: Sweden (chair), the Netherlands, Ireland Introduction: The report presented by the Working group is based on the answers seventeen countries gave to a questionnaire1 on the subject. The evaluation of the questionnaire was complex due to the variety of Basic State Pensions existing in the EU countries. It should be understood as a contribution to, and update of the extensive presentation on European pension systems made at the EUFASA-conference in Madrid 2002. The aim of the questionnaire was - To check if there had been changes in the pension systems concerning spouses. To investigate the different solutions already working in some countries. To look for a model that could be applicable to our respective countries.

Background: There are 4 kinds of “pensions” for spouses. 1. Spouse allowance is not a “pension”, it is an allowance given to the employee abroad for his spouse accompanying him/her on posting. Some countries have strongly recommended that the employee should commit this amount to a private pension fund for the spouse, i.e. Germany. Almost all countries of the EU, with the exception of Spain and Cyprus give some kind of allowance. The allowance is always paid directly to the officer and depends upon the presence of the spouse at the posting, and it is reduced or discontinued if the spouse is working and has an income. 2. Personal pension plan: At home - they are normally included in a state pension plan. Abroad - the difficulty begins when they accompany the employee abroad. Some countries have a Spouse compensation for loss of pension rights, where the MFA contributes to the state pension fund of the spouse up to a certain amount (Austria) 200 Euros if he /she is not working. In other countries, the spouse pays privately when he/she is abroad in the state pension fund, this is very costly because they pay the employer’s part as well or they pay in a private pension fund scheme, (Czech Republic,) In the U.K., spouse compensation is paid only when posted abroad and only after a spouse/partner has been overseas 3 years. It is paid into the officer’s bank account, part of overseas allowances not taxable.

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Participating countries: UK, Ireland, Spain, France, Italy, Cyprus, Greece, the Netherlands, Finland, Sweden, Germany, Austria, Switzerland, Iceland, Portugal, Czech Republic, Belgium. Further information from Denmark and Norway.

2 Since 2001, Switzerland has set a Government’s spouse compensation. The spouse has to organize her own private pension account and pays the premium her/himself. The contribution is given in form of a reimbursement into the officer’s bank account, independently of the posting at home or abroad. What almost all spouses of Foreign Service officers have in common is the impossibility of contributing to a state pension fund on a permanent basis. Some countries offer citizens with low, or no income a basic state pension. Whether MFA-spouses have access to the basic state pension depends on taxes, residency or other factors.2 3. Social Pension is a non-contributory minimum pension guaranteed by the State. It is independent of individual contribution and employment. It is normally paid to people with no property, who have furthermore no or a very low pension. It is normally family-related, that means a spouse married to a MFA-officer will not qualify for it. The social pension is paid to a person resident in the country, but independent of the years of residency. (Germany, Spain, Cyprus, etc.) 4. Widow/Widower Pension is a pension the spouse will receive after the officer’s death. It various according to the country from 40 to 80% of the officer’s pension. In Sweden and Norway, this kind of pension does no longer exist. The Norwegian MFA has therefore introduced a compensation for MFA-spouses. 5. BSP: This well be explained below Changes since Madrid 2002 concerning pension schemes in favour of spouses According to the charts presented at the Madrid Conference 2002 the Foreign Ministries of Austria, Denmark, Iceland, Norway, and Sweden pay an amount into a private pension scheme for the spouse. The Finnish State Treasury pays monthly pension compensation to the spouse of a MFA officer who has been present at post while abroad as from the age of 65. Switzerland’s pension contributions are paid both during the time serving abroad and at home. Since 2002 four countries have improved or recognized the specific situation of spouses posted abroad. The Austrian MFA raised its participation in the State Pension Fund up to a subsidy of 70 percent, while the spouse is posted abroad. The UK and the Netherlands (start 2008) are paying a compensation for the loss of pension rights. Greece is going to introduce a spouse’s pension fund. One country, Sweden, is most probably going to abolish the pension fund for spouses, which was introduced in 1997 (negotiations still ongoing, May 2007). Pension compensation to spouses while posted abroad was introduced by the Swedish MFA as early as 1974. The loss will be compensated for by a raise of the spouse allowance. However, only spouses who have had an income from work are qualified to get any allowance at all. Possible solutions for Basic State Pension presented by the different countries Basic State Pension (BSP) is a minimum pension guaranteed to individuals by the State. Usually, it is not family-related and independent of individual contributions or employment. Basic State Pension exists in Finland, the Netherlands, Denmark, Sweden, Ireland, the UK and Norway. It is paid to people with no or very low income and is related to the State
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For further information please check: Pension at a Glance: Public Policies across OECD Countries, Edition 2005 and the EUFASA-Report on Pension Madrid 2002.

3 pension system. This means that if a person has a lower pension than the national BSP his or her pension will be increased to the level of the BSP. In the Netherlands the BSP is also paid to people with high-income, because it is income-independent. In the Netherlands, Finland, Sweden, Iceland, Norway and Denmark the BSP is paid according to the number of years of residency in the country. The full amount is paid after 40 years of residency. In the Netherlands and in Denmark spouses, while posted abroad are registered as residents in their home country. If they for some reasons (country or employer) are not automatically staying in the system, spouses in the Netherlands are offered the possibility to personally pay the contributions to the Dutch BSP. In Sweden years abroad can be counted for the BSP when within the EU or EEA countries (European Economic Agreement), Canada and Switzerland. In Finland spouses when posted abroad are considered as resident in Finland as long as they do not work in the country of posting. In the latter case, they are no longer included in the Finnish Social Security System and these times are not counted for BSP. In Norway the BSP is also connected to the residency, but spouses are when posted abroad no longer considered as residents. Their years abroad therefore do not count. In the UK the BSP is linked to a certain numbers of years contributed to the National Insurance and not to the residency. The BSP (contributory) in Ireland depends on individual contributions. Spouses would be unlikely to qualify for the non-contributory BSP, if benefitting from the officer’s pension. Conclusion: Only the Nordic countries and the Netherlands have enough in common concerning the BSP to be fairly comparable. In these countries the individual gets the full amount of BSP after forty years of residency. The amount can be 460 € a month (Finland) up to 1542 € a month (Island). It is interesting to note that Norwegian MFA-spouses are not considered as residents in their country while posted abroad. Possible strategies concerning BSP for spouses: For the Nordic countries it would be of great importance for the spouses to get the right of home residency while posted abroad in order to secure the full amount of BSP. Since legislation and tax systems vary considerably within the EU it is difficult to develop a common strategy to secure pension for spouses. There exists no common role model. Also the ongoing efforts in the EU on alignment of European Pensions Systems and the Portability of Pensions within EU, as being brought forward by the two corresponding EU Directives, are still at a very early stage of implementation (and acceptance) in the member countries. To lobby in this direction it would be advisable for each Association to find a comparable country (in terms of legislation and tax systems) within EUFASA that could be used as role model. Also, it would be advisable to check on a national level if exceptions have been made for other groups which work and live under similar circumstances. For instance, spouses of Swedish missionaries and aid workers have a better status within the Swedish Social System than the MFA-spouses. It would be interesting to find out on a national level if families of military, security officers, artists, police officers, etc. have special rights within their respective social system.

4 It is also remarkable that in some countries relativly generous spouses allowances are linked to the recognition of the role of spouses: In the Netherlands, in Denmark and in the UK spouses following their MFA-partners abroad are considered as supporters of the gouvernement (Duty of Care of the MFAs). Their willingness to move abroad is in favour of the gouvernement and therefore the gouvernement wants and feels to be responsible for them.


				
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