The European Commission should take a more holistic view of the need to boost supplementary pension schemes as “pension systems are not only about financial markets”, according to Mihails Kozlovs of the European Court of Auditors (ECA).
Kozlovs was speaking during a press briefing yesterday about an ECA project that found that the IORP II Directive and the pan-European personal pensions product (PEPP) framework had failed to stimulate the further development of supplementary pensions in the EU.
Asked about the Commission’s and EIOPA’s responses to the ECA’s analysis, Kozlovs said that, somewhat unusually, they had to a large extent accepted the auditor’s conclusions and were also already taking action that could address them.
In its Savings and Investment Union (SIU) strategy the Commission said it would, by the fourth quarter of this year, issue recommendations on the use of and best practices for auto-enrolment, pensions tracking systems and pension dashboards and recommend the development of such tools. It also plans to put forward proposals for reforms of the IORP II Directive and the PEPP regulation by then.
“For the time being, the SIU communication is quite an aspirational document, and we are looking forward to seeing more specific proposals from the Commission, together with EIOPA, to address the deficiencies that we have identified,” said Kozlovs.
He encouraged DG FISMA, the department in charge of the IORPII and PEPP laws, to work with other parts of the Commission to generate “concerted and coordinated action”.
“We need a bit more of a holistic view at the Commission level,” he said, adding that supplementary pensions had to do with financial markets but were also a matter of fiscal sustainability, transparency and everyone’s right to a decent pension, as per the social pillar.
Matti Leppala, secretary general of PensionsEurope, welcomed the ECA’s report, saying the external auditor had delivered an honest analysis of the PEPP and cross-border IORP failures.
He also said the Commission’s response was valuable in confirming the timetable for the IORPII and PEPP reviews, given that a planned PEPP consultation launch was running behind schedule.
The details
According to the ECA, although the lack of progress on cross-border occupational pensions is mostly due to factors beyond the EU’s remit, the IORPII Directive is somewhat to blame because it lays down additional requirements for cross-border pension funds compared with those operating only in their home market.
Meanwhile, the pan-European personal pension product (PEPP) has not gotten off the ground – there are only two providers three years after the regulation became applicable – despite the Commission having estimated the market could reach €700bn in 2030, the ECA pointed out.
It said the limited take-up of the PEPP was due to issues beyond the Commission’s control, but that the Commission had gone ahead with the initiative without adequately explaining how it would have the desired impact.
According to Kozlovs, if the Commission delivers a PEPP reform proposal, this should be underpinned by “a proper impact assessment”.
“The previous one was heavily criticised already within the European Commission, but the Commission went ahead with the PEPP proposal despite voices saying that, as it is designed, it will hardly take off, and that’s what we’re witnessing here,” he said.
The ECA’s investigation also covered supervision and transparency initiatives, noting that “despite its efforts […] EIOPA was in no position to ensure consistent supervisory practices across the EU” and that EU plans to improve transparency under the Capital Markets Union strategy had borne little fruit so far.
It urged the Commission to increase transparency by making progress on pension tracking systems and dashboards.
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