Establishing a cross-border pension-tracking system (ETS) was never going to be easy, but the TTYPE project – short for Track and Trace Your Pension in Europe – has been considering options since 2013, recently developing a business plan for the venture.
The consortium comprising Danish pension provider PKA, Dutch providers PGGM, APG, MN and Syntrus Achmea and the UK and German construction sector funds B&CE and SOKA-Bau has been working on the plan since March 2015. In early 2016, it presented its plan to the industry, outlining its vision of a viable – and profitable – entity.
Titus Sips, strategy consultant at APG, and Richard Lugtigheid of PGGM estimated that, depending how TTYPE approached its launch phase, the break-even point could be reached within six to nine years.
The six-year break-even could be achieved, the pair argued, if TTYPE was rolled out by offering a ‘find your provider’ service, alongside a simultaneous connection to the existing national tracking services (NTS). It would take nine years to reach profitability, according to the plan, if these steps were done sequentially. However, the staged approach would also have the benefit of reducing the start-up costs associated with the quicker option, if the €5m costs of the first phase were met by the EU.
But the two options do not address the question of financing, which remains conten tious. Should the project seek funding from the European Commission to cover its initial operating costs? And would such a sizeable amount – exceeding €10m for the first option – be obtained without drawing on the EU budget? If not, will those member states already in possession of an NTS see sufficient benefit of one spanning the continent to agree to finance it through membership fees? Or will they be willing to pay the €0.03-0.05 per member cost TTYPE estimates it will charge to cover expenses?
Industry participants asked to comment on the business plan recommended that the ETS first connect with the established NTS to prove its worth, or that industry bodies across Europe representing the more mobile work forces – such as the construction or shipping industries – be invited to establish industry-wide tracking systems. This would demonstrate both the viability and need for tracking at a time when only a small fraction of the EU’s population – about 8m out of 500m – has rights in more than one country.
However, the benefits of investigating an ETS were not in doubt, and many praised the work undertaken since the Commission approached the founding members of the consortium. TTYPE’s work will form the underlying architecture of a pensions register in the Limburg tri-national region – the border regions where the Netherlands, Belgium and Germany intersect. And the already established ‘Find Your Pension’ initiative to allow public sector researchers in the EU to trace their rights has agreed to work closely with its new partner.
The work is also informing the European countries lacking any kind of sophisticated tracing service, such as the UK, Europe’s largest pension market.
At a time when automatic enrolment is boosting savings but also potentially creating hundreds of thousands of small, forgotten pots as workers switch between employers, any advice on the design of the Financial Conduct Authority’s planned Pensions Dashboard will be welcome.
While the project is worthy, questions remain over its feasibility, and on the demand for its services. TTYPE may be premature. Yet, given the decade-long timescale for implementation, it could arrive just in time.