The EU Parliament has decided to cut payouts from its plush Voluntary Pension Fund in an attempt to save the fund without resorting to taxpayer money.
The fund was set up in 1992 to supplement the substandard pensions of Italian and French MEPs. But it was open to all MEPs before being closed to new members in 2009 when the current general pension scheme came into effect. Payouts, which some beneficiaries receive in addition to their salary or other pensions, can be as high as €5,000 a month, though average monthly payments usually come to about €2,000.
But it was poorly set up and managed, and with just under 1,000 current and future beneficiaries, including current commissioners and pro-Brexit former MPEs. It is currently running a €300 million deficit and will likely run out of money by 2025.
The unsustainability of the fund has been known for years and it has already been the subject of several cases in the European Court of Justice (ECJ), its beneficiaries haggling with the bureau (the MEPs who run Parliament’s internal affairs), over maintaining payouts. The latest ruling landed in Parliament’s favour, adjudicating that the allowance of adjusting payments and contributions must be done proportionally.
Now, with the collapse of the fund pending, Parliament has decided to do just that.
On Monday, May 22nd, the bureau chose to slash payouts to beneficiaries by 50%, raise the eligibility age from 65 to age 67, stop the annual increases linked to inflation, and attempt to get more beneficiaries to accept a one-time payout offer to quit the scheme.
The decision follows options laid out in a report delivered to Parliament earlier in May.
According to Politico, this move will extend the life of the fund to 2027.
It is also less legally risky than simply shutting down the fund and distributing it. For the moment, the bureau can avoid having to bail the fund out with taxpayer money. As it was set up, the fund is a liability for Parliament. German Green MEP Daniel Freund presented a motion earlier in May calling on MEPs to voluntarily pull out of the pension program, comparing it to a Ponzi scheme. His motion was flatly rejected by the European Parliament, 272 votes against, 203 in favor, and 148 abstentions.