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UK Workers in Europe Lose over GBP300M from their pensions every year.

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Mazars, international accountants and business advisers, has called on European Union member states to change their rules on cross-border pension funds. The firm estimates that British workers are currently barred from paying over £300 million into their pensions every year.

Mazars research indicates that more than 50,000 British nationals are currently working in Europe, in roles ranging from the construction industry to architects, journalists, computer experts and management consultants. Although this growing trend of spending part of your working life abroad may do wonders for your career and language skills it can be very damaging to your pension. So while there is freedom of movement for workers throughout the EU, many individuals are paying a heavy price in terms of their pension rights.

A recent case in the European Court of Justice (Skandia/Ramstedt), decided in June 2003, is pointing the way towards recognition of pension funds across borders. However, in practice the single market in pensions is far from complete, and many barriers still exist.

Mazars believes the European Union should be aiming at:
* A common system of funded pension arrangements ("second" and "third pillar") schemes throughout the EU;
* Full tax deductions of contributions to these schemes, wherever they are set up within the EU, and;
* The same contribution levels throughout the EU

By way of an example of how workers are disadvantaged, take Mr Smith, who is a water industry consultant. He has had his own UK company, through which he provides his services. He earns £70,000 per year and makes contributions of £10,000 to his UK personal pension plan. Mr Smith sees an opportunity in Germany and moves there, expecting to stay for a few years.

During his time in Europe he makes contributions to the German social security system, but would like to continue paying contributions to his own UK personal pension plan, if he can get tax relief on the contributions. As soon as he goes to work in Germany, he will become a German resident and will cease to be a UK taxpayer. When in Germany, he and his company will become liable to pay social security contributions totalling 19.5% of his salary in Germany to cover pensions and unemployment.

As far as his UK personal pension is concerned, while he can continue to contribute, his payments are limited to £3,600 per annum. However, these contributions are not tax-deductible in Germany, so that he will be pay these contributions out of fully taxed income. After four years he decides to return to the United Kingdom. His contributions to the German pension scheme are not sufficient to enable him to qualify for a German pension, so Germany will make a refund of his contributions.

During his period abroad he has missed significant contributions to his UK pension fund. Even assuming he has made the maximum contributions of £3,600 per year, over the four-year period he will have missed contributions of over £25,000 (£6,400 * 4).

Mazars is calling on EU member states to recognise pension funds based throughout the EU. While, in our example, Mr Smith is working in Germany, a deduction should be available in Germany for contributions made to his UK pension scheme. Similarly his contributions to the UK personal pension fund should not be restricted to £3,600 per year.

Rodney Taylor, Tax Director at Mazars, said: "It is intolerable that in a European single market UK workers who spend part of their careers in other member states are losing out on their pensions.
They should not be penalised in this way, but encouraged to make adequate provision for their retirement. The ECJ is heralding the way to a single market for funded pensions and member states should fall into line as soon as possible."


For more information call Rodney Taylor of Mazars on 01582 700700

or visit http://www.mazars.co.uk

About Mazars

Mazars is a leading international firm of accountants and business advisers. Its 5,000 professionals represent clients in 54 countries worldwide.

In Europe, Mazars is the largest accountancy-based partnership outside the Big 4. It ranks 5th largest firm in terms of fee income in France, 6th in Spain, Italy and The Netherlands and 7th in Portugal.

In the UK Mazars is the 11th largest integrated accountancy and business advisory partnership in terms of fee income. It has 18 offices and a staff of 1,000 including 84 partners.

In addition to providing the traditional accountancy services of audit, corporate finance, corporate recovery and insolvency, tax advisory, payroll and company secretarial, it also provides specialist services such as forensic investigations, risk management, business advisory, financial services, pension scheme auditing, human resources, print management, technical accounting support, training, and information technology consultancy.

Mazars was formerly known as Mazars Neville Russell in the UK.