The European supervisory authority for occupational pensions could be given the power to raise a levy on pension schemes, according to proposals presented by the European Commission (EC) today.
The measure is part of a package of proposals for reform of the European Supervisory Authorities (ESAs), of which the European Insurance and Occupational Pensions Authority (EIOPA) is one.
The overall thrust of the reform proposals is to further strengthen and integrate EU financial markets supervision. It provides for stronger powers for the ESAs in general, and new ones for the European Securities and Markets Authority (ESMA), which looks after the financial system as a whole and coordinates EU policies for financial stability.
“This proposal is a first concrete step towards the establishment of a single capital markets supervisor and towards completing the Financial Union (comprising the Banking Union and the Capital Markets Union) by 2019 to guarantee the integrity of the euro,” said the Commission.
One of the Commission’s proposals was to introduce a new funding system for the ESAs to ensure their resources were commensurate with the new tasks they were being assigned.
The new funding system would involve scaling back funding from the public sector, to be replaced by industry contributions.
It is unclear how these contributions would be determined. The Commission has proposed that they be “fair and proportionate” to the benefit that each contributor draws from the work of the ESAs.
“Concretely, each subsector will have to bear the costs of the work carried out by the ESAs in relation to that sector,” said the Commission. “Within the sector, contributions will be distributed according to the size, reflecting the importance of financial firms.”
James Walsh, EU and international policy lead at the UK’s occupational pension scheme trade body, noted that giving EIOPA the power to raise a levy had been on the agenda for some time.
“It looks like we’re there,” he told IPE.
As expected, EC proposes EIOPA levy on pension schemes, though detail unclear and Brexit impact unknown. See p.8 https://t.co/d0660mo83N— James Walsh (@jwalshPLSA) September 20, 2017
Much was still unclear, he said, pointing to the language about industry contributions being linked to the extent institutions benefit from EIOPA’s supervision.
This raised the question of whether a levy would only apply to institutions operating cross-border pension schemes, or apply proportionate to the extent such an institution ran a cross-border scheme.
“We simply don’t know yet,” said Walsh, adding that there would be a delegated act and therefore future legislation on this.
What was clear, however, according to Walsh, was contributions currently paid by national supervisory authorities would be replaced by new industry contributions.
“This does suggest all UK schemes would be paying to EIOPA,” he said. The implications of the UK exiting the European Union were another “unknown” in relation to the EC’s proposals for UK pension funds, he added.
The Commission said the proposals did not necessarily mean there would be a higher burden on the financial sector.
“As industry contributions are being introduced, the contributions by national supervisors – in many cases also financed by the financial sector – will be reduced to zero,” it said. “Moreover, contributions will be collected by national authorities, who may where applicable use existing collection systems.”
The next step for the Commission’s ESA reform proposals is for them to be discussed by the European Parliament and the Council. Other aspects of the proposals include changing the ESAs’ governance structures by introducing independent executive boards, giving ESA stakeholders a stronger say in the guidelines and recommendations issued by the supervisory authorities, and EIOPA being tasked with setting EU-wide priorities for supervision in the form of a strategic supervisory plan against which national supervisors would be assessed. The Commission has also proposed a greater ESG role for the authorities.