Plush pension fund for EU lawmakers has a €300 million shortage.
Taxpayers in the EU may soon be forced to fork over €23 million annually to save a pension plan that is about to collapse for hundreds of former members of the European Parliament.
High-ranking members of the European Parliament are rushing to try and save a legacy pension system that faces a €308 million shortfall and may not have enough money by 2024.
Alessandro Chiocchetti, the top civil officer of the Parliament, said in an internal memo that the fund, which provides benefits to hundreds of former EU lawmakers, is in a "dramatic financial situation" and "the fund will run out of capital soon."
Senior MEPs discussed the document behind closed doors on Monday of last week in Strasbourg, but they have not yet made a decision.
The choice to take no action is categorically off the table, according to a spokesperson for the Parliament.
The supplementary pension plan was established by the Parliament in 1990, and it operated for 30 years before being closed to new applicants in 2009 when a unified pension plan took effect.
The fund is currently in serious trouble, in part because donations from politicians stopped 14 years ago.
German Green MEP Daniel Freund stated, "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." Ponzi schemes are a type of fraudulent investment that are only able to continue by constantly enticing new participants.
"This borders on criminal energy," remarked Freund.
The fund's chairman, Stephen Hughes, who served as a Labour U.K. MEP from 1984 to 2014, argued that Parliament should keep its promise to pay the pensioners.
According to Hughes, "The Parliament walked into this with their eyes wide open, and I think they’re being very unfair."
He continued, saying that the fund has been "very well managed" but was destined to run out of money after being closed in 2009. "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 said.
The Luxembourg-based business that oversees the fund's investments only has about €55 million of the €363 million that would likely need to be distributed after 2074. Previously, the Parliament supplemented the remaining two-thirds of the contributions made by MEPs.
The secretary general's said that, "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 document also states that "this amount is insufficient to meet its future pension payment obligations."
That implies that approximately €23 million might be taken from the EU budget, which is financed by taxpayers.
The document from the secretary general, which was prepared for 14 lawmakers to review at a meeting on April 17 under the direction of President Roberta Metsola, proposes three possible solutions.
The first course of action would be to do nothing and let the fund go bankrupt, which would force the government—and the taxpayer—to "most probably" assume responsibility for the pension commitments. The second choice would be to liquidate the fund and then give recipients a sizable lump sum payment. Thirdly, the disaster might be avoided by making a number of changes to tighten up pension entitlements, like raising the eligibility age for pensions or even lowering the amount beneficiaries receive.
The payment increased with length of service in parliament; now, 914 persons, mostly long-serving MEPs, ex-MEPs, or their surviving family members, are getting an average of €2,206 each month.
The spokesperson for the parliament noted that in order to fully consider their options, members have asked for additional legal and financial information.
Raising the retirement age and tightening other terms and conditions helped the Parliament win multiple legal battles against beneficiaries of the fund in order to avoid the legacy fund from depleting the institution's funds.
Following appeals from fund representatives, the Court of Justice of the European Union in March issued a definitive decision supporting the Parliament and reaffirming the Bureau's legal authority to proportionally cut payouts.
The worst case scenario, according to Hughes, is for the Bureau to decide in a way that triggers yet another round of legal action.
A Socialists and Democrats (S&D) MEP from the Netherlands, Lara Wolters, wrote that any "way forward should not come at a cost to European taxpayers." Even though "the Parliament may be obliged to keep this Fund ‘alive’ — it is not legally obliged to guarantee current levels of payouts."
By fLEXI tEAM