More harmonised rules for DC pension plans and more freedom of choice are among the main proposals in the European Federation of Investment Funds and Companies’ (FEFSI) response to the European Commission’s communication on pensions in Europe.
In its report, FEFSI welcomes the recognition of investment funds and companies as pension vehicles by the Commission, but urges for the need for rules to define DC plans on an EU level. It also claims that a European fund directive should not prescribe a specific DC system as these can “take various forms ranging from single funds to self-directed pension savings plans with wide range of investment options,” the report says.
One of the federation’s concerns is that the communication is based more on an assessment of the interests of the traditional pension providers than on the interests of European workers and small and medium-sized companies which employ the largest numbers within the European Union.
Steffen Matthias, FEFSI’s Brussels-based secretary general, believes in the need for a greater freedom of choice of occupational pension schemes. People should be free to choose between the traditional pension system with mandatory coverage of biometric risks and a pension system without or with optional coverage of those. “Biometric risks should be used when they are necessary,” he says. “Some people may have the need to cover them, but if you have no family why should you cover these risks?”
“You should have not only two different options but also have the freedom to combine them,” Matthias adds.
He adds: “For instance, you could have a retirement scheme covering biometric risks and, on the other hand put money into an investment fund, to increase the sum you get at retirement.”
FEFSI’s proposal highlights several quality criteria that the pension funds directive should face in order to meet “the goal of optimal pension provision”.
These criteria are related to the institutional security of DC pension plans, their economic efficiency – allowing them to invest on equity and real state, with a greater risk diversification – and their transparency, flexibility and portability.
“We haven’t had a reaction from the Commission as yet,” Matthias says. “This is a discussion that has only started.” Paula Garrido