An EU-wide framework for third-pillar personal pension products (PPPs) with an optional set of ‘second regime’ rules is inching forward.
But completion of the new framework is not due until February 2016. Legislation would require a number of further stages and finalisation would take years.
In July 2014 the Commission issued a call for advice (CfA), requesting EIOPA to provide technical advice. Behind all this is a need, according to the Commission, to diversify pension options, especially in member states where second-pillar pensions are underdeveloped.
The CfA is the second in two years and EIOPA is now being asked to look in more detail at cross-border implications and measures on prudential regulation and consumer protection.
However, the Commission’s overall tone is cautious. It notes that any new provisions would not replace national rules, but would provide an alternative option. A decision on harmonisation and whether to create a new EU-wide PPP framework will follow after EIOPA’s final advice is received.
EIOPA is asked to consider possible forms of legislation – a Directive to be individually implemented in national rules, a cross-border Regulation, or a combination of the two.
These approaches could embrace a range of provisions, including general governance, product regulation, pre-and post-contractual information disclosure, cross-border issues with a ‘passport’ to allow them to operate across the EU and measures applied to distribution, such as rules on transparency.
The topic of unified rules for pan-Europe pensions, commonly known as the twenty-ninth regime, can be tracked back nearly a decade, according to the Brussels-based European Financial Services Round Table (EFR).
In its March 2014 paper, ‘The Road Ahead for Financial Services in Europe’, the EFR recommended a legislative package to provide “clear and stable rules, and greater transparency”. Further, it suggested, “a common pensions ‘language’ would facilitate easier comparison”.
In 2010, the European Fund and Asset Management Association (EFAMA) recommended the introduction of a personal retirement plan – referred to at that time as the Officially Certified European Retirement Plan (OCERP) – which was to have consistent certification standards across Europe.
EFAMA referred to the funding gap in existing pension schemes and the reduced ability for the financial sector to supply long-term financing. Almost five years on, those gaps have not been filled.
Brussels sources have expressed surprise and concern at the amount of time being allotted to EIOPA to prepare its report. Another view is that a new regime will not offset the underlying issues of meagre investment returns.
EIOPA says the 2016 deadline is justified because of the need for extensive and delicate liaison work across the EU’s 28 member states and consultation with numerous stakeholders groups, including providers, consumer representatives, national supervisors and academics.
Representatives of the European Parliament’s main political parties appear not to have taken a line on this topic.
Guillaume Prache, managing director of Better Finance, a Brussels lobby group representing retail investors, laments that the Commission’s good intentions too often have to be watered down and pours scorn on EU pussy-footing.
The pragmatic reason, of course, is that advances are often blocked in the Council, where the national interests of the 28 governments often predominate. In this case, Prache believes the Commission is exaggerating its foot-dragging.
Delaying legislation until 2020 or later would inevitably lead to a lost opportunity to promote cross-border long-term saving and another blow to future investment, growth and job creation across Europe.