The EU Parliament is wringing its hands over what to do with a legacy pension fund that is going bankrupt.
At a closed-door meeting earlier in April, the bureau, the circle of senior MEPs who oversee the chamber’s financial management, were presented with three options to handle the 300-million-euro hole in the special, voluntary pension fund that provides a second salary for many politicians, including high-profile names such as Nigel Farage and Josep Borrell.
One option is plugging it with taxpayer money from Parliament’s budget.
The fund was set up in 1992 to address the substandard pension rights of Italian and French MEPs, according to the Financial Times, but it was open to all MEPs before being closed to new members in 2009 when the current general pension scheme came into effect. Today it has just under 1,000 current and future beneficiaries, including retired and active politicians. Payouts can be as high as €5,000 a month, though average monthly checks are cut for about €2,000.
Several high-profile politicians who once served as MEPs are among its beneficiaries, including Josep Borrell, now EU commissioner for foreign affairs, British broadcaster and politician Nigel Farage, and French right-wing politician Marine Le Pen. According to EUobserver, 75-year-old Borrell currently receives from the fund on top of his salary of about 20,000 a month.
The unsustainability of the fund is well known, as it has already been the subject of several cases in the European Court of Justice (ECJ), its beneficiaries haggling with the bureau over maintaining payouts.
In March, the ECJ handed down a final ruling that Parliament could adjust payments and contributions proportionally. Making such adjustments was one of the options presented to the bureau to deal with the fund, as it will run out of money by 2024 or 2025, according to the report discussed by Parliament President Roberta Metsola and the bureau at a closed-door meeting earlier in April.
“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 report says. “This amount is insufficient to meet its future pension payment obligations.”
One way to shore up the fund would be to give it about €23 million per year from the taxpayer-funded parliament budget. If the fund were simply allowed to drain, parliament, and subsequently EU taxpayers, would have to take over the payments.
The way that the fund was set up leaves Parliament liable for the fund. MEPs were permitted to use their allowances—money allocated to pay for personal purchases of office supplies and other day-to-day job-related needs—to pay their contributions.
According to the Financial Times, most current MEPs want to see the fund dissolved, as it’s a source of embarrassment for the chamber. The EUobserver also reported late last year that the fund is invested in an American arms company that makes cluster weapons—prohibited in a treaty signed by various EU member states as well as mining and fossil fuel companies.
In comments to The European Conservative, British businessman and pro-Brexit politician, Ben Habib, who served in the EU Parliament in 2019, said the situation exemplifies many of the problems with the EU.
“If this were a real government that couldn’t pay its civil servants or a private company that had not topped up its pension fund this would be big news,” he said. “This should be big news, but it doesn’t look good for them to complain.”
Indeed, while Borrell is collecting a healthy additional pension, his compatriots in Spain and many other European countries are watching their governments raise retirement ages.
“It’s complete incompetence,” he added. “It’s extraordinary. This is an institution that has trillions of euros at its disposal, and it keeps messing up.”
The bureau hopes to avoid further litigation over the fund and it becoming the next financial scandal. Using taxpayer money to keep the fund going is the least desirable option.
Another idea for the fund presented in the report was to sell off the assets and distribute the cash to the beneficiaries. Asking well-off beneficiaries such as Borrell to voluntarily leave the program has also been bandied about, according to media reports.
It is another test for Brussels’ big bureaucracy to manage itself, but does anyone expect it to pass?
