The Dutch Cabinet has rejected the standardised pan-European pensions product (PEPP) proposed by the European Insurance and Occupational Pensions Authority (EIOPA).
In a letter to the Dutch Parliament and EIOPA, it argued that a PEPP would serve only third-pillar pension systems and questioned whether the vehicle would “add anything” to existing arrangements.
It also claimed EIOPA had failed to determine exactly which problem the PEPP would solve, or what its scope would be.
“Second-pillar products in the Netherlands,” it pointed out, “are, like in many other European countries, the domain of the social partners, which conclude the pensions contract after negotiations on labour conditions.”
Because these contracts are fine-tuned to the needs of participants from a given company or sector, a harmonised pensions product would be “unuseful and unacceptable” for the Netherlands, the Cabinet said.
Last month, the Dutch Pensions Federation questioned the added value of a PEPP, and warned of the difficulty of achieving a level playing field for pension funds, insurers and banks due to differences in regulatory regimes.
However, according to Hans van Meerten, a professor of international pensions law at Utrecht University, PEPPs will provide Dutch pension providers, pension funds and insurers with new opportunities across Europe, “particularly Eastern Europe, where the options for accruing a pension are limited”.
He warned the Dutch pensions sector that a “European pensions union” was beginning to take shape, as European legislation supersedes local law.
He also noted, however, that Dutch legislation had been at odds with European law before, citing the mandatory participation of companies in industry-wide schemes as an example.
To address this potential problem, he recommended linking ‘mandatory participation’ to a pension plan rather than a provider.
He also called for the harmonisation of pension funds’ capital requirements at the European level to prevent providers in different countries from being subject to different requirements for the same pension arrangements.
He said opponents of harmonisation could not complain about Dutch employers moving pension plans to Belgium because of its “more flexible rules”.