Compulsory membership of pension schemes and the free movement of services in the EU
| DOI | 10.1177/1388262717713414 |
| Published date | 01 June 2017 |
| Date | 01 June 2017 |
| Subject Matter | Articles |
EJSS
Article
European Journal of Social Security
2017, Vol. 19(2) 118–140
Compulsory membership of
ª The Author(s) 2017
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DOI: 10.1177/1388262717713414
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Hans van Meerten
University of Utrecht, The Netherlands
Elmar Schmidt
University of Utrecht, The Netherlands
Abstract
Mandatory pension participation in the Netherlands is currently under review. This article
examines the manner in which the system of mandatory participation in sectoral pension funds is
presently organised as well as future proposals from the perspective of the freedom to provide
services. It also briefly reviews mandatory participation in Belgium, Denmark, Germany, France
and Sweden and asks whether it constitutes a barrier to the freedom enshrined in Article 56 TFEU.
Restrictions of this freedom in the field of mandatory participation are too easily excused in the
Netherlands by pointing to decisions by the European Court of Justice (ECJ) in which it judged the
system to be permissible. These decisions, however, were made from the perspective of com-
petition law, and not on the basis of Article 56 TFEU. Grounds for justifying restrictions to this
freedom exist, although different justifications are available for direct and indirect discrimination.
The article questions how mandatory participation in the Member States considered in this article
fare from this perspective?
Keywords
mandatory participation, 56 TFEU, occupational pensions, services, The Netherlands, competition
Introduction
An often-heard reason for making participation in a pension scheme mandatory is to protect
future retirees from their own myopia when it comes to retirement planning by forcing
them to save. In addition, mandatory participation can lead to cost savings created by
Corresponding author:
Hans van Meerten, University of Utrecht, Achter Sint Pieter 200, 3512 HT Utrecht, The Netherlands.
E-mail: h.vanmeerten@uu.nl
Meerten and Schmidt
119
economies of scale that result from forcing a large number of individuals to join a pension
scheme.1
In the Netherlands there are approximately €1300 billion in pension assets – accrued in no small
part thanks to mandatory participation – and this leads to a compelling case study of whether
mandatory participation complies with EU law. Mandatory participation in a pension fund in the
Netherlands is currently regulated by the Wet verplichte deelneming in een bedrijfstakpensioen-
fonds (The Act on Compulsory Membership of a Sectoral Pension Fund 2000) or ‘Bpf Act’ (Wet
Bpf 2000).
According to the explanatory memorandum to the Bpf Act, the rationale for making participa-
tion in a sectoral pension fund mandatory is twofold. First, its aim is to eliminate competition
between employers in respect of the pension arrangements that they offer their employees. This
supposedly prevents a race to the bottom in terms of employment conditions.2 Second, there is the
social goal of ensuring that all employees within a given sector have identical pension arrange-
ments in order to protect weaker workers,3 adding a solidarity element.4 For these reasons, man-
datory participation is valued highly by Dutch government.5 The explanatory memorandum to the
Act explains that mandatory participation has played a significant role in increasing pension fund
participation.6
Occupational pensions in the Netherlands are actually only quasi-mandatory. This means that,
while in principle there is no statutory obligation for all employed persons to be affiliated to an
occupational (second pillar) pension scheme, collective agreements make participation mandatory
for employees within the respective sector. The result is that participation in occupational schemes
is near-universal at more than 90 per cent of Dutch employees.7
The social partners in the Netherlands design the scheme and its features in these collective labour
agreements. At the request of a ‘significant majority’ of a particular sector of industry, the Minister of
Social Affairs can make participation in the occupational pension scheme mandatory by extending
the application of the collective agreement to all parties defined in it. In the Netherlands, only Dutch
pensioenfondsen, which must have the legal form of a stichting (i.e., a foundation) may operate a
mandatory sectoral scheme. Non-Dutch pension providers are therefore excluded from operating
mandatory sectoral pension schemes. This requirement is the main focus of this article.
This article explains, first, how mandatory participation is organised in the Netherlands and in a
selection of other EU countries and, secondly, assesses the system of (quasi) mandatory partici-
pation from the perspective of European law and European Court of Justice (ECJ) case law.
However, because of the size of the Dutch schemes, the focus of this article is mainly on the
Netherlands. In addition, the article also assesses whether mandatory participation in a scheme,
instead of a fund, is compatible with EU law. This assessment takes place, inter alia, in light of
proposed legislative changes that are outlined in section 2.4 below. These proposed Dutch legis-
lative changes may, if enacted, link mandatory affiliation to a pension scheme rather than to the
pension fund.
1. Chen and Beetsma (2015).
2. Heemskerk (2015).
3. Ibid.
4. Schols-van Oppen (2015).
5. van der Poel (2013).
6. Explanatory Memorandum to the Sectoral Pension Funds Act 2000, Kamerstukken II 2000/01, 27 073, nr. 3.
7. Chen and Beetsma (2015).
120
European Journal of Social Security 19(2)
The main question that is addressed here is: can a justification be found in EU law for man-
datory participation in a pension fund and/or in a pension scheme?
Mandatory participation in the Netherlands
Current state of affairs
In the Netherlands, there are two main types of mandatory participation.8 First, there is the so-
called kleine verplichtstelling, or ‘small mandatory participation’, which refers to the obligation on
an employee to participate in their employer’s pension scheme. This type of mandatory partici-
pation is part of the employment conditions and the government is generally not involved. Rather,
the obligation arises out of the employment contract or collective labour agreement. This type of
mandatory participation does not in principle seem to preclude the free movement of services,
since the employer seems free to choose a provider, that may be based in a Member State other than
the Netherlands.
The second main type of mandatory participation concerns the grote verplichtstelling, or ‘large
mandatory participation.’ This type was established by the Bpf Act. As a consequence of this Act,
participation in a pension scheme for employers and employees in certain sectors of industry is
mandatory through government intervention, and only Dutch pensioenfondsen, which have the
legal form of foundations, are eligible to operate such schemes.9
Finally, a third type of mandatory participation will also be discussed briefly. This concerns
mandatory participation in a pension scheme as enshrined in the ‘Wet verplichte beroepspensioen-
regeling’ (Wvb Act or Wvb) in English: the Mandatory Professional Pension Schemes Act (see
below, paragraph 1.1.2). Certain parallels can be drawn between the Wvb Act and the proposed
changes to the Bpf Act.
The Dutch sectoral pensions Act 2000 (Wet Bpf 2000)
The Bpf Act empowers the Dutch Minister of Social Affairs and Employment to make participation
in a sectoral pension fund (known in the Netherlands as a bedrijfstakpensioenfonds, or ‘Bpf’) of a
particular sector of industry mandatory at the request of a ‘significant majority’ of social partners in
that sector.10 In order for the majority to be deemed significant, the number of employees working at
the requesting businesses must represent at least 60 per cent of the total number of workers employed
within the sector. Under certain conditions, a lower ratio may be classified as significant, but any
percentage under 50 per cent cannot yield a significant majority under any circumstances.11
The consequence of the Minister’s decision to make participation mandatory is that, in princi-
ple, all those who fall within its scope must participate in the sectoral pension fund. This mechan-
ism can also be found in Belgium, France and Germany. It applies to employers as well as
employees, regardless of whether or not they are organised in a trade union or employers’ asso-
ciation, and whether or not they want to participate.12 Because of this policy, over 75 per cent of
8. Goudswaard (2013).
9. Article 1 of the Dutch Pensions Act.
10. Article 2 Act on Compulsory Membership of a Sector Pension Fund 2000.
11. Schols-van Oppen (2015).
12. Heemskerk (2015).
Meerten and Schmidt
121
Dutch employees who have some type of pension arrangement participate in a mandatory sectoral
pension scheme.13
In accordance with the Act, mandatory sectoral pension schemes may be operated only by
a pensioenfonds, a Dutch pension fund. This arises out of the definition of what a sectoral
pension fund is under the Dutch Pensions Act, to which the Bpf Act refers. The Pensions Act
distinguishes between a ‘pension fund’ and a ‘pension institution’. It defines a sectoral
pension fund as a pensioenfonds. A pensioenfonds, in turn, is defined as; ‘a foundation [in
Dutch: stichting] which is not a Premium Pension Institution (PPI) [ . . . ].’14 A Bpf must,
therefore, be constructed according to the...
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