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Capital Markets Union – Push for EU Personal Pension Products

Capital Markets Union – Push for EU Personal Pension...

A cornerstone of the European Commission’s plans for Capital Markets Union (CMU) is to boost the level of savings going into investments. The principle being if you link long term savers to long term investments you get the double benefit of better retirement provision and deepening capital markets options for business finance. The challenges to progress are significant but given the right level of engagement by industry and genuine political support the size of the prize is substantial.


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At the recent European Commission conference to discuss initial proposals for EU personal pension products, policymakers and industry came together to discuss what the priorities should be.

Vice President Dombrovskis, the Commission official responsible for CMU, spoke of the need for a solution to Europe’s retirement provision, saying that by 2060 there would be only two working citizens for every one citizen aged over 60, down from four now. This implies an impossible burden on future governments’ social provisions. He highlighted early findings from the Commission’s consultation, giving an indication of likely direction of focus:

  • Not enough products on offer; lack of cross-border options; need online offering.
  • Support for an EU Personal Pension Product, but needs to be simple and transparent.
  • Support from industry – more choice and competition, building on existing infrastructure.
  • Need to complement not replace state and occupational provision.

Gabrielle Bernardino, Head of the European Insurance & Occupational Pensions Authority, the watchdog for pensions across Europe, together with advocates for an EU framework, said not enough was being done to make private regimes available. He called for:

  • Greater awareness by an EU pensions’ tracker system to highlight to citizens the level of saving they would need for a given level of retirement income.
  • Need for Member States to provide incentives.
  • The Commission could include sustainability of pension provision assessments in country data.
  • Options would need to include a defined contribution design and another, more collective option with risk sharing of upsides and downsides, and with clearly defined pooling.

Industry speakers highlighted the practical challenges, including:

  • Currently dealing with a fragmented market with higher costs and less competition - need for a single market.
  • More political certainty would allow a long investment horizon, so providers can invest in long-term assets.
  • UCITS provides the ideal model as it is recognised as a cross-border success. The ambition should be to create as successful a product and investment managers could leverage existing infrastructure. The shortcoming of UCITS has been national gold-plating. The approach for personal pensions should be an EU regulation to prevent national approaches and overlays.

The Commission clearly means business and proposals are likely to advance swiftly during 2017. Given the potential size of the European market, industry should be getting behind proposals to help think through how to overcome the obstacles.

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