Commission unveils plans for pan-European pension
30 June, 2017
The European Commission proposed on 29 June establishing a new pan-European pension product to increase private savings for old age and boost the growth of an EU industry currently worth some €700bn. The measure is part of policy efforts to defuse a demographic time bomb that could hit the ageing continent over the next 50 years when the ratio of retirees to working-age people is estimated to double.
As EU states’ stretched public finances are already struggling to cover the current levels of pensions, the Commission is trying to encourage personal savings to make up for lower pensions.
The proposed Pan-European Personal Pension Product (PEPP), if approved by EU states and the EU parliament, will give consumers a new savings option and is expected to increase the number of people subscribing to a personal pension, the Commission said.
Currently only 27% of working-age EU citizens have bought personal pensions, which complement occupational and state-funded pensions, setting aside €700 billion managed by banks, pension funds or insurances. The industry is expected to double its size in the EU by 2030, but the Commission said that, with PEPP, assets under management could reach €2.1 trillion.
This is expected to benefit countries where there is virtually no market for personal pension products, particularly in eastern Europe. The Commission said that only in Germany, Austria, Slovenia, Spain and Sweden 15% or more of eligible consumers made such investments. Mobile workers, who build their pension in several EU states, could also show interest, although they may face costs for merging the capital accumulated in different countries.
EU countries will remain free to set their tax treatment of PEPP, although the Commission urged them to grant PEPP the same tax relief applied to national products.