European Parliament faces lawsuit over cuts to voluntary MEP pension fund

EU Pension Fund

Pascal Hansens || ""
Pascal Hansens
14 July 2023
Payouts from the parliament’s controversial voluntary pension fund are being halved. Aggrieved beneficiaries of the top-up scheme now want the European Court of Justice to intervene.
Beneficiaries of a luxurious top-up pension fund used by hundreds of politicians are set for a court battle with the European Parliament. Fund members are readying a class action lawsuit against the institution’s decision last month to slash payouts from the lavish scheme in an effort to stave off a looming bankruptcy and growing public criticism.

Investigate Europe reported in May that there was a €300 million deficit in the European Parliament’s voluntary pension fund, a little-known scheme used by around 900 past and present MEPs, including Marine Le Pen, Nigel Farage and EU foreign policy chief Josep Borrell.

After years of inaction the Bureau of the European Parliament, the body responsible for internal affairs, finally took action amid the mounting scrutiny. They formally agreed on 12 June to reduce payouts from the scheme by 50 per cent, freeze inflation-linked increases and raise the retirement age from 65 to 67. The parliament said the measures could wipe out most of the deficit and put it on a “more sustainable path”.

The decision, unsurprisingly, did not please members, plenty of whom rely on the scheme’s generous benefits. The fund closed to new subscribers in 2009 but can provide some beneficiaries with up to €6800 per month, a handsome top-up on the regular EU pension which can be up to €6900 per month.

At a meeting in Brussels on 29 June, the fund’s board, made up of a dozen mostly former MEPs, decided they would fight the decision in the European Court of Justice. Stephen Hughes, the chairman of the fund and a UK Labour MEP until 2014, confirmed to Investigate Europe that a class action challenging the decision would be launched and a case would be lodged with the court by October.

High-profile Spanish law firm Uría Menéndez, which represented fund members in past unsuccessful challenges, is set to act for them once again. It is unknown how many members will be part of the legal action.

“We hope that a large number of members will support the class action,” Hughes told Investigate Europe. “But they will have to weigh up the pros and cons carefully. If the judgment is in our favour, they will be compensated, but if they lose, they could have to cover the costs of the trial.”  

They intend to rely on the arguments of a European Court of Justice ruling in March 2023, which rejected an appeal by former French conservative MEP Françoise Grossetête against other changes to the fund. 

However, the judges stated that cutting pensions were legally admissible in cases of insolvency “provided that the principle of proportionality is respected”. Moreover, they added that it was always necessary to “balance the interests involved”. In other words, it is important to take account of other remunerations, in particular the statutory pension. 

“The Bureau decision was prepared with Parliament’s legal service and was grounded in the General Court decision from March,” a spokesperson for European Parliament President Roberta Metsola said. “We are confident that the decision is solid, but it is of course a right enshrined in the treaties for an individual to contest a decision that affects him or her.”

A parliamentary source said the pension fund changes, which came into force on 1 July, represented a medium risk scenario for the bureau given that they include not only a reduction in payouts but additional cutbacks. German Green MEP Daniel Freund, a former rapporteur on the EP budget and an outspoken critic of the fund, believes the decision is legally sound. “But you never know what the European Court of Justice is going to say at the end.”

Hughes says the decision to slash the pension payouts is at odds with the principles laid down by the court in its March ruling. “The Bureau of the European Parliament, which hastened the decision after the recent media uproar, is well aware of this,” he said.

He believes Metsola has played a political game with the pension fund. He says that the primary objective was to avoid a potential scandal ahead of European elections in June 2024, which would have further undermined the institution’s reputation, already damaged by the Qatargate corruption crisis.

What’s more, Metsola is “passing on the hot potato” to the next presidency, Hughes says, highlighting that a final decision on the fund would only come after the court case which could take two years. This could leave Metsola’s successor, expected to be from the left-leaning social democrats, with the unenviable task of having to deal with the fallout from the controversy.

Freund says the bureau’s decision “cannot be read as a delaying strategy”, as it is not known if Metsola has given up running for another presidency term. Moreover, “the custom of rotating presidency between the EPP [Metsola’s party] and the S&D [Socialists & Democrats] is not set in stone.”

Whatever happens with the presidency, the bureau has said it could revisit the decision next year, in the hope of introducing even deeper cuts to the fund. For the beneficiaries, they will feel the cuts to their pensions for the first time this month. If the European Court of Justice does rule that the decision was not proportionate, the parliament could be forced to reimburse fund members and be left to inject more money to keep bankruptcy at bay. 

Editor: Chris Matthews


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