BRUSSELS — EU taxpayers may quickly be coughing up €23 million per 12 months to bail out a pension scheme for a whole bunch of former European parliamentarians that’s poised to implode.
Top European Parliament officers are racing to attempt to rescue a legacy pension fund that faces a €308 million shortfall and will run out of cash as quickly as 2024.
“The fund will run out of capital soon,” states an inside doc ready by the Parliament’s high civil servant Alessandro Chiocchetti, and seen by POLITICO, which says the fund benefiting a whole bunch of former EU lawmakers faces a “dramatic financial situation.”
Senior MEPs mentioned the doc at a closed-door assembly in Strasbourg on Monday final week, however haven’t but determined what to do.
“The option of doing nothing about it is clearly off the table,” a Parliament spokesperson mentioned.
The Parliament arrange the supplementary pension scheme in 1990, and it ran for 30 years till being closed for brand spanking new members in 2009 when a unified pension scheme got here into pressure.
Due partly to lawmakers’ contributions stopping 14 years in the past, the fund is now in dire straits.
“I think that no more taxpayer money should be wasted on a structure that quite honestly [is] set up a bit like a Ponzi scheme,” mentioned Daniel Freund, a German Green MEP. Ponzi schemes are a type of fraudulent funding that may solely survive by frequently bringing on new members.
“This borders on criminal energy,” Freund mentioned.
Stephen Hughes — the fund’s chairman, who was a U.Ok. MEP with Labour from 1984 to 2014 — mentioned Parliament ought to honor its dedication to paying the pensioners.
“The Parliament walked into this with their eyes wide open, and I think they’re being very unfair,” Hughes mentioned.
“Those members gave years of loyal service to the European Parliament and they feel aggrieved to be treated in the way they’re being treated right now,” he added, arguing that the fund has been “very well managed” however was sure to expire of cash after being closed in 2009.
Unclear future
The fund — investments of that are managed individually by an organization primarily based in Luxembourg — solely has round €55 million of the €363 million it’s foreseen will must be paid out past 2074. MEPs used to pay in one-third of the contributions, with the Parliament topping up the remaining.
“Owing to the termination of contribution payments by Members and the Parliament, insufficient investment returns and the effects of successive financial crises as well as geopolitical instability, the situation of the fund has since 2009 rapidly deteriorated,” the secretary normal’s observe says.
“This amount is insufficient to meet its future pension payment obligations,” the doc provides.
That means the taxpayer-funded EU finances might be raided to pay about €23 million per 12 months.
The secretary normal’s doc, drafted for the perusal of 14 parliamentarians at a gathering chaired by President Roberta Metsola on April 17, outlines three potential choices.
The first can be to do nothing and let the fund go bust, that means the Parliament — and the taxpayer — will “most probably” need to take over the pension obligations. The second choice can be to liquidate the fund after which supply a big lump-sum fee to beneficiaries. Thirdly, catastrophe might be staved off by a collection of tweaks to tighten up the pension entitlements, equivalent to by elevating the eligible pension age or just lowering the quantity beneficiaries obtain.
The longer an individual had served as parliamentarian, the upper the entitlement — 914 individuals, most of them long-serving MEPs, ex-MEPs or their surviving members of the family, are at present receiving a median of €2,206 monthly.
The Parliament spokesperson added that members have requested additional authorized and monetary data to be able to look at all of the choices.
The Parliament has fought a number of authorized battles towards beneficiaries of the fund — and received — after elevating the retirement age and tightening up another phrases and circumstances to be able to cease the legacy fund from draining the establishment’s funds.
After appeals by representatives of the fund, the Court of Justice of the European Union in March delivered a ultimate ruling siding with the Parliament and confirming that the Parliament’s Bureau has the authorized proper to cut back entitlements in a proportional method.
Hughes mentioned, “The worst outcome for this would be for the Bureau to make a decision that would lead to yet another round of litigation.”
Lara Wolters, a Dutch MEP from the Socialists and Democrats group, wrote to POLITICO that any “way forward should not come at a cost to European taxpayers.” Even if “the Parliament could also be obliged to maintain this Fund ‘alive’ — it’s not legally obliged to ensure present ranges of payouts.“
