The Pensions Regulator

EU cross-border pension schemes

.

.

.

Is your pension scheme accepting contributions in respect of European members?

This section tells you what you need to consider.

Where does the scheme have its main administration?

If a scheme has trustees in the UK and is set up under UK law, it can be taken to have its main administration in the UK. This guidance applies to schemes which have their main administration in the UK.

If a scheme has its main administration in an EU member state other than the UK, but there are or will be members in the UK, the scheme may be accepting contributions in respect of European members. However, the scheme has its main administration outside the UK and should follow the procedure for authorisation and approval of the relevant EU member state.

If the pension scheme has its main administration overseas in a country which is not an EU member state, this guidance does not apply. Remember that the Channel Islands and the Isle of Man are not EU member states, and nor is Switzerland.

If there is any doubt, your scheme’s legal adviser will be able to confirm where the scheme has its main administration.

Do you have 'European members'?

If you only have non-UK scheme members located in countries which are not EU member states, this guidance is not relevant.

This guidance is relevant if your scheme includes European members or European survivors.

Once a scheme is authorised and approved to accept contributions in respect of European members, it remains subject to the cross-border legislation for as long as it has any European members, or European survivors.

If the liabilities for any such European members or European survivors are met in full, either by transferring them completely to another arrangement, or by buying out their benefits, such members would no longer be European members or European survivors of the scheme they have left.

If a scheme which is so authorised and approved no longer has any European members or European survivors, the trustees can apply for revocation of authorisation or approval.

Trustees and employers should be mindful of the position of all members, including deferred members and pensioners, when considering whether their scheme should be seeking authorisation and approval.

Which country's social and labour law applies to the scheme members?

If all scheme members are subject to the social and labour law of the UK, and the scheme has its main administration in the UK and this situation is not about to change, the scheme is not accepting contributions in respect of European members and this guidance does not apply.

If the pension scheme has its main administration in the UK but has members who are subject to the social and labour law of another EU member state, the scheme is accepting contributions in respect of European members.

As a general rule, people who are required by their employment contract to work habitually in another state for an indefinite period are likely to be subject to any relevant social and labour laws in that state. The essential question is whether the nature of any member’s employment means that the scheme has to comply with any other EU state’s social and labour laws in respect of that member.

If the employer is considering sending employees who are members of a pension scheme overseas to work in another EU member state, this could cause the scheme to start accepting contributions in respect of European members, depending on whether that other country’s social and labour law will apply to the employees.

However, it is also necessary to consider whether all the employees concerned are seconded employees. If they are, they will be subject to the UK’s social and labour law, the scheme will not be accepting contributions in respect of European members and this guidance does not apply. If they are not all seconded, this guidance should help you with how and when to apply for authorisation and approval.

Who are 'seconded employees'?

If employees are sent by a UK employer to work overseas for a period in another EU member state, and at the end of that period intend to return to resume work for that employer in the UK or intend to retire, then:

• if they were sent to the other EU member state for a limited period; and
• they were sent for the purpose of providing services on behalf of the UK employer; and
• they intend at the end of that period either to return to the UK to work for the same employer, or to retire,

they are counted as seconded employees.

The characteristics of a secondment are:

• the employee being sent to work overseas from the UK;
• the employee providing services on behalf of the UK employer;
• the limited period; and
• the expectation either to return to the UK or to retire (in the UK or otherwise) at the end of that period.

If an overseas posting has these characteristics, it may be regarded as a secondment. Cases which do not have these characteristics (if, for example, no limited period was expressed, or there was no expectation of return to the UK or retirement at the end of the limited period) should not be regarded as secondments.

If employees are working in another EU member state but are not seconded, perhaps because they work in more than one state, it does not automatically follow that they are subject to the other state’s social and labour law. It depends on whether their place of work is sufficiently located in the other member state.

The main characteristic of a limited period is that it will end on a specified date although it is also possible for a period to be ‘limited’ if it ends when a specific event, such as the completion of a project, takes place.

If employees work abroad for an indefinite period, or for their entire career, that should not be regarded as a secondment.

If a member of a scheme is seconded overseas and, at the end of that secondment is seconded again, either to the same or to another EU member state, this should be regarded as a ‘fresh start’ rather than a single secondment. Each secondment must maintain the characteristics of a secondment.

If the question of extending an existing secondment arises, the trustees should be sure that the secondment is really for a limited period, and that the total period of secondment is not in fact a permanent posting.

It is up to the trustees to determine whether any members of the scheme who work in EU member states other than the UK are seconded employees.

The fact that an employer has seconded employees in its pension scheme does not mean that the scheme is accepting contributions in respect of European members. If the only employees working overseas are seconded employees then this guidance does not apply. UK employers should make sure that they are aware of all employees who are posted to other EU member states, and should be clear whether they are ‘seconded employees’ so that the trustees of the relevant schemes can have this information to hand.

.

.

.