New European legislation might be needed to remove the many obstacles that workers face when switching occupational pension schemes, the European Commission said yesterday.

The Commission launched a consultation with employers and unions but said it had not excluded bringing forward a draft directive to break down one of the barriers to workers' mobility in the European Union.

It called for a basic level of harmonisation across the EU, with rules to shorten vesting periods for employees entering occupational pension schemes - the minimum membership period for acquiring the right to a pension - and to establish the right for all EU citizens to transfer pension contributions between schemes.

New rules should cover not only workers moving to a different scheme in another EU state but also problems associated with transferring pension rights between occupational schemes in a member state.

"Only an EU-wide solution can address this problem, which is a serious headache for a growing number of workers in the EU," said Anna Diamantopoulou, the EU's employment and social affairs commissioner.

The Commission pointed to a number of problems that workers face when they transfer between employers. It said pension entitlements were guaranteed only when a number of conditions were met, including minimum age, waiting periods before becoming a member and vesting periods. Career breaks can reduce pension rights and some entitlements are not index-linked.

Even where workers are able to make a transfer payment to a pension scheme in another member state, the approval of the regulator may be needed or the tax charge may be so high that it prevents the transfer from happening in practice.

"Basically, wherever there are rules on occupational pensions in whatever country, there are also obstacles," said a Commission official.

Unice, the European employers' federation, said yesterday it would look positively on any initiative to improve employees' mobility.

"However, if we're talking about switching pension schemes within a single member state, it's more debatable whether an EU-wide solution is the right one," said a Unice official. "We can't resolve all issues at an EU level."

Commission officials admitted that a cut in vesting periods could have cost implications for companies, as more people would enjoy greater benefits sooner.

The Commission warned last week's agreement by EU finance ministers on new rules to enable pension funds to operate across Europe would help workers who moved country and were able to stay in the same pension scheme but do little for workers who were forced to change scheme.