The European Insurance and Occupational Pensions Authority (EIOPA) has written to the European Commission to submit its initial analysis on the creation of a single market for third-pillar pensions.
The Frankfurt-based regulator was requested by the Commission to submit a report looking at the required prudential regulations and consumer-protection measures required to form an EU-wide single market for personal pensions.
In its initial response, EIOPA has identified two feasible options, a directive to introduce common rules for current and future third-pillar savings, or regulation to create a new regime for common EU savings vehicles.
The regulator said its finding supported either option, in its correspondence with the Commission.
EIOPA, however, identified three major obstacles for the creation of a single market, namely taxation, social law and contract law.
Within taxation, the largest barrier to EU-wide savings, its analysis highlighted four areas where member states’ taxation policies affected the single market.
The transfer of accumulated capital proved a significant taxation obstacle, with transfers between providers in different member states currently subject to withholding tax, or prohibited entirely.
Differences on taxation on contributions paid in, and benefits paid out, regarding non-domestic schemes also caused concern.
EIOPA said, currently, no case law created by the European Court of Justice (ECJ) prevented the discriminatory treatment of savings in non-domestic providers.
Alongside this, there are also significant differences in taxation policy on investment income, and in tax-relief arrangements on contributions, which vary widely among member states.
Social and contract law has also proved problematic, with a lack of harmonisation across member states resulting in large product variety, EIOPA said.
To combat this, the regulator provided the directive and regulation options.
It said there was a strong case for a directive to establish a single market, given that common regulation already exists for the majority of personal pension providers.
With regards to a second regime, EIOPA said there was strong interest to further explore the pros and cons of such an approach, as its own analysis should not been seen as exhaustive.
It added that any new regime would also need tackle the de-cumulation stage, and that it would need to focus more on defined contribution products and product standardisation.
Gabriel Bernardino, chairman at EIOPA, said its conclusions were consistent with stakeholder contributions, which agree that a single third-pillar market would benefit consumers, providers and the EU economy.
“Pensions should be dealt with from a European perspective,” he said. “EIOPA is committed to strongly promote this single market for pensions.
“Our report should lay the foundation for future EU initiatives aimed at fostering sustainable, adequate and safe pensions for EU citizens.”