The pensions industry is growing concerned about the European regulator’s role in the creation of a new retirement savings product.
The European Insurance and Occupational Pensions Authority (EIOPA) has been leading the development of a pan-European personal pension product (PEPP).
However, attendees at the Institutional Retirement and Investor Summit, organised by Barbara Bertolini in Vienna last week, warned that EIOPA could be exceeding its authority. It would be the first time a supervisory authority in Europe has created a product for retirement saving.
“The fact that EIOPA as the top supervisor is involved in designing a product is crossing a threshold that maybe should not be crossed,” said Hansjörg Müllerleile, director of corporate pensions and related benefits at the German Robert Bosch Group.
He added: “PEPP is the answer to a question nobody asked.”
Müllerleile pointed out that the number of truly mobile employees in Europe – the main target audience for the PEPP – was very limited.
Klaus Stiefermann, managing director at the German pension fund association aba and board member at PensionsEurope, also warned about the current PEPP proposal that was tabled by the European Commission in June.
He said: “PEPP is to be implemented via a regulation and not a directive. A directive would mean member states could adapt it to fit national particularities. With a regulation this is not possible, it has to be implemented directly.”
The complexity of the different tax regimes will be one of the major problems for the pan-European product, Stiefermann said. “How can a smaller provider cover all 27 different tax regimes?” he asked.
Additionally, he was worried that varying taxation of the PEPP – which is possible under the current draft – would lead to a sort of ‘tourism’, with people retiring to the country with the best PEPP tax regime.
Overall, delegates and members of the panel discussion at the summit agreed PEPP was not set out to be a pension product – only a savings product at best.
“Many provisions regarding the payout phase have not been fully thought through,” said Georg Thurnes, board member at RFM Retirement Aon Hewitt in Munich.
Christian Böhm, managing director of Austrian pension fund APK and board member at PensionsEurope, added that PEPP might distract from true occupational pension solutions: “Employers might say they will only provide an absolute minimum pension plan relying on their employees to save for themselves via a PEPP.”
The European Parliament’s Economic and Monetary Affairs committee is due to issue a preliminary decision on the PEPP on 4 June 2018.