How new pan-European pension product can encourage savings
In its opinion the EESC stresses that savers should be aware of the risks that they bear
Maria Koleva, Brussels
3 November, 2017The need for consumer protection and risk mitigation for savers during the course of their working lives and retirement was among the emphasis made by EESC in its opinion on a Pan-European Personal Pension Product – PEPP. The committee is in favour of creating such product, but points out that it is unclear as to whether the investment arising from this initiative will remain within the EU and its impact on labour mobility across the EU. The Commission adopted a proposal for a regulation on a pan-European personal pension product, together with a recommendation on the tax treatment of personal pension products, including the PEPP, in June this year. This proposal is in line with the EU's 2015 Action Plan on Building a Capital Markets Union and is aimed at expanding the personal pension market to EUR 2.1tn by 2030.According to the estimations, just around 27% of the EU's 243m citizens aged 25 to 59 years are currently saving for a pension. The EU executive considers that offering a pan-European personal pension product would encourage further savings. The opinion, which rapporteur is Philip von Brockdorff, Maltese economist, was adopted during the EESC 529th plenary session, held in October, and it reads that this initiative must not in any way undermine the importance of public or occupational pension schemes. The rapporteur also stressed that it is of crucial importance that savers are fully aware of the risks that they bear and the conditions attached to their PEPP and urge that this issue needs to be addressed as early as possible by the Commission.In its analysis, the consultative body acknowledges that PEPPs are most likely to appeal to a limited number of groups, particularly, mobile professionals who work in a number of different Member States over their working life, and the self-employed. Every effort should be made to encourage the Member States to provide fair taxation on this type of product. This initiative should not in any way be construed as lessening the relevance of either state or work-based pensions, EESC says.It emphasises as well the role of European Insurance and Occupational Pensions Authority (EIOPA) in monitoring the market and national supervisory regimes. Given that the interactions between statutory, occupational and personal pensions are unique to each Member State, the EESC recommends that providers be able to adapt their PEPPs to national markets whilst respecting the need for convergence and consistency. The committee is unsure whether PEPPs will make any difference in Member States that rely heavily on statutory pensions and where traditions of private retirement savings are weak. The role of Members States in promoting PEPPs is deemed critical to supporting this initiative. The opinion concludes that PEPPs should not appear as a mere extension of what is currently available to those choosing voluntary, private savings plans. Underlining the importance of consumer protection, the EESC seeks clarity as to whether the proposed 1.5% shall be applied as a flat percentage or subject to a cap on absolute values. The Commission should also examine waiving the fee for changing providers, following a defined period of time, to the advantage of savers, and future prospect of PEPPs and the regulation must also lay down basic rules on access to the accumulated funds by the saver's heirs, in the event of the death of the saver, the opinion recommends.