A phoney war is in operation. No guns are being fired. No bombs falling. But there a number of indications of an arms race over the matter of a simple two page information document known as KID – and its possible extension to cover the occupational pension sector.
Unsurprisingly, the arms race involves a deluge of words. What is new is that a fresh force has stepped up its activity in the fray. This is the European Commission’s DG Sanco – the directorate general (DG) with the mandate for public health and consumer protection.
Clearly on the side of the reformists, the DG issued a staff working document, Consumer Protection in Third-Pillar Retirement Products, in April 2013, covering pension investment products purchased by individuals.
The document states that as such schemes will in future play a greater role in pension provision, they may require an EU certification. They could also be subject to measures to “improve information for consumers”.
The DG also draws on a questionnaire sent in October 2012 to member state governments and others, claiming all consumer groups welcome attempts to improve consumer protection in this market. It also notes that stakeholders highlighted “the difficulty of implementing an EU approach, due to the different features of regulatory frameworks and national markets”.
The DG’s reactions to the April 2013 consultative document are expected to out before the end of the year. What emerges could be critical and the outcome could lend support for application of KID to third-pillar pension products.
In any case, DG Sanco’s position reinforces other DGs involved in pension matters. The Commission has been applying pressure for several years to upgrade consumer protection in both the third-pillar sector and occupational pensions. Only under pressure did it drop KID from its PRIPs proposal for these pensions.
The position of the European Insurance and Occupational Pensions Authority (EIOPA) is reflected in a statement that says the holders of personal pension products “need information throughout different phases of the contract”. This comes in a discussion paper, dated May 2013, on a possible EU single market for personal pensions products.
The European Parliament is the forum for on-going debate on the PRIPs regulation on the KID. Its Economic and Monetary Affairs Committee (ECON) recently voted to support the Commission’s proposal of July 2012 to have KID coverage for packaged, managed and structured investment products.
The vote also allowed for the exclusion of the KID from insurance products that do not offer surrender value and from most occupational pension schemes. However, the voting majority was too narrow to give the committee a mandate to open negotiations with the Council.
An angry Pervenche Berès, co-ordinator of the regulation in the committee, referred the matter back to a later session of the Parliament. Unlike in committee, Parliamentary votes are public, which exposes anti-reformists.
Berès, a French socialist MEP, took the risk of new amendments and consequent further delay, which could push the initiative beyond the next parliamentary election. Afraid of a failure of PRIPS, consumer interest groups, comprising EuroFinUse, Finance Watch and BEUC were planning a joint letter to MEPs supporting the Regulation.
PensionsEurope opposes the application of KID in both occupational and personal pensions, at least for the time being. Its legal adviser, Julian Arevalo says the organisation is awaiting further study of the matter by EIOPA.
The basic position of the institution has been that anything that would give an excuse for companies to withdraw from workplace pensions would be detrimental.
As for the timing of the outcome of PRIPs, the reformist German MEP Sven Giegold comments: “I’d say it’s getting more difficult to get the package cleared through Brussels before May next year, but it is still feasible”.
He forecasts that the various sides will continue push for KID in the third pillar. This might pave the way towards incorporation of the KID in occupational pensions, albeit at a much later date.