MEPs face 50% cut to luxury pensions, but public still set for hefty bill

Sigrid Melchior || ""
Sigrid Melchior
Pascal Hansens || ""
Pascal Hansens
23 May 2023
The European Parliament is set to slash payouts from its controversial top-up pension fund by 50 per cent as part of measures aimed at eradicating a €300 million deficit and averting a looming bankruptcy. Despite beneficiaries now facing major cuts to their pension payments, around €86 million is still expected to be covered with public money.
After years of procrastination and an ever-growing deficit, the European Parliament has finally taken the bull by the horns to address the impending bankruptcy of a voluntary pension fund used by around 900 former and current MEPs. The fund – open for MEPs between 1991 and 2009 – has run a deficit for over 20 years, due to its overly generous entitlements. Investigate Europe previously reported on the crisis engulfing the scheme, which counts 21 sitting MEPs as beneficiaries as well as Marine Le Pen and Josep Borrell, the EU’s foreign policy chief.

On Monday, the Bureau of the European Parliament, an internal decision-making body made up of 20 high-ranking MEPs, agreed in principle to change the scheme. Three Bureau members are still beneficiaries of the fund: conservative Othmar Karas from Austria, Latvian national-conservative Roberts Zīle and left-wing Greek politician Dimitrios Papadimoulis. All three removed themselves from the decision process.

The Bureau decided to cut the pension payouts in half, freeze inflation-linked increases and up the retirement age from 65 to 67. All fund members will also be offered to withdraw from the scheme through a one-off payment. They will be able to claim back the contributions made personally, with an additional incentive of up to 20 per cent of that amount, to encourage them to withdraw.

Contributions to the fund were paid in one-third by the MEPs and two-thirds by the European Parliament. But the individual contributions were automatically deducted from MEP general allowances, monthly lump-sums supposed to cover office expenses, not a salary. 

The European Parliament says the measures could slash the estimated €310 million deficit by €224 million and “put the legacy pension scheme on a more sustainable path.” The calculation is dependent on a certain number of MEPs withdrawing from the fund – an unknown. And still under the changes, €86 million would have to be covered with taxpayer money from the EP budget. An official agreement on the measures is expected to be a formality. It was agreed, however, to review the situation and the impact of these decisions in 2024.

A decision on how to deal with the ballooning deficit had been put off for years by successive administrations afraid to touch the issue. Yet the fund’s looming bankruptcy and the upcoming parliament elections next year made it impossible to ignore.

Jüri Laas, spokesperson for the European Parliament president Roberta Metsola, says that Metsola has acted as “swiftly as possible” to address the deficit. “It was clear for her that she could not refrain from acting and push this in the long grass. It is part of her reform agenda, to make the EP more efficient, accountable and modern.”

But for critics of the fund, the measures do not go far enough. “This is a step in the right direction, but it is clear that it is only a partial solution,” says Daniel Freund, a German Green MEP in the budget control committee. “It means in any case that the fund will go bankrupt anyway, even if the bankruptcy will be smaller than expected. It will end up being bailed out with taxpayers’ money, and that’s a lot of money.”

Freund also expressed strong doubts about the projections by the Bureau, fearing that the estimates were overly optimistic. The only solution for Freund is to change the MEPs’ statute. In force since 2009, the statue places legal responsibility on the European Parliament to bail out the fund in case of bankruptcy. “The Greens call for the deletion of article 27 of the statute for members of the European Parliament and thus remove the legal basis that obliges the EP to bail out the fund,” Freund says. “We must avoid using taxpayers’ money by any means.”

But changing the MEP’s statute won’t be a simple matter. It would require both a vote in the European Parliament and in the Council of Ministers – where at least 20 out of 27 the governments would have to agree.

The other unknown is whether the beneficiaries will try and get the cuts reversed in the European Court of Justice. Previous attempts to overturn changes to the fund in the court have failed. For now, at least, the EU’s golden pensions look set to lose some of their shine.

Editor: Chris Matthews
This story has been published with our media partners Mediapart and Infolibre.


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