The long-awaited EU green paper on pensions will hold few surprises. Obvious issues such as barriers to free movement of labour and limited common laws for prudence and retirement provision around Europe will be covered, according to industry predictions.
The paper, due for publication in the next two months will, according to Geoffrey Furlonger, a partner at Mercers in Brussels, probably involve lengthy consideration of the economic intricacies of barriers to free movement of labour.
He also predicts that the paper will consider regulations on prudence, a prediction with which Alan Broxon of the European Federation for Retirement Provision concurs.
Furlonger says he expects a “pretty comprehensive document”, but adds: “I would expect there to be a discussion of the effects of EMU on pensions, but I wouldn’t look for any bombshells. I’m sure it will involve a continuation of previous debate.”
The paper, he said, should also address the well-worn ground of diversification of investments and elimination of the barriers to the free movement of capital and investments.
Broxon says he would like the European Commission to abandon an approach to pensions prudence based on volatility as a measure of risk.
He suggests the paper could include a consideration of the pension status of migrant workers and perhaps address pension provision for part-timers, but identifies adequate definition of prudence as the issue he wants prioritised.
Expressing confidence that the issue will be addressed, he adds more pointedly: “We would prefer no systematic investment controls, but instead a common definition of prudence so that the managers of different funds could have some latitude.”
He continued: “In the developed pensions world, underperformance is more of a problem than volatility. If one tries to write prudential rules which recognise only volatility you end up with rules that raise employment costs and ultimately lower pensions. We want to see an abandoning of this approach.”
No comments yet