In our input to the European Commission, PensionsEurope supports the Commission’s objective to simplify the life of taxpayers operating in the single market and we welcome the review of the VAT rules. In general, we believe all pension fund participants should be protected from unnecessary VAT burdens, regardless the character of the schemes as well as the Member State in which the services are being received. The current exemption for special investment funds should be extended to all pension schemes.
Even though the VAT exemption is in place, in some countries there is a stamp duty (for instance 4%) that is not subject or exempt from VAT and there is no possibility of any deduction. We urge the EC to recommend Member States to exempt (at least) pension schemes from this duty (or decrease their duty to no more than 1%).
Finally, we believe that establishing a cross-border investment-friendly tax environment in the EU not only requires removing unfair tax treatment but also introducing tax incentives.
In a press release issued today, PensionsEurope corrects the conclusions from Better Finance on the Bulgarian pension funds. Making use of incorrect data, Better Finance declares that Bulgarian private pensions have failed and goes as far as to recommend reversing the private pension reform of 2000 which means nationalising individual pension savings in Bulgaria. Not only would this have a detrimental effect on Bulgarian pensions, it also strongly contradicts with numerous European policy recommendations that highlight the importance of strengthening supplementary pensions in order for all Europeans to have adequate and sustainable income in old age. Read more in our press release.
PensionsEurope welcomes the ECB review of its monetary policy strategy which has undergone a process of gradual transformation since it was adopted in 1998. Today the euro area is facing various new economic challenges, such as the COVID-19 crisis, and there will be many new challenges to overcome in the upcoming years which need to be jointly tackled by monetary, economic, and fiscal policies.
As despite negative interest rates and QE programmes the ECB has not achieved its inflation target over the last years, possibly the ECB could be more flexibility around its inflation target and consider targeting price growth in a band, in full respect of the ECB’s price stability mandate as enshrined in the Treaty.
In general, we believe that unconventional monetary policies have had effect in many areas, including various positive and negative side effects. This applies for the economy at large, as well as for pension funds more specifically in the form of preventing a (severe) recession, realising relatively good returns but also substantially more expensive liabilities. You can read our input to the ECB review of its monetary policy strategy here.
On June 30, PensionsEurope submitted its feedback to the High-Level Forum CMU report. You can find our feedback here.
PensionsEurope submitted its comments to the EIOPA consultation on the PEPP ITS supervisory reporting and cooperation. You can find our comments here.
Together with various firms and institutional asset managers, PensionsEurope, Pensioenfederatie, iapf and Insurance and Pension Denmark submitted a joint response to the ESMA consultation on central clearing solution for pension schemes arrangements. The response highlights that if pension funds are required to clear their derivatives and to post cash as variation margin, we need to ensure that liquidity will be granted in the repo markets in times of market distress and set up collateral transformation arrangements with central banks. Central banks would provide a facility that would allow pension funds to transform high quality collateral to cash, at a haircut and cost. A high credit-quality, regulated entity would intermediate between pension funds and central banks. This entity could be an existing CCP, or any other regulated entity set up purely for this purpose
PensionsEurope responded to the European Commission’s consultation on the review of the Non-Financial Reporting Directive (NFRD).
The goal of the NFRD review consists of ensuring that companies disclose adequate ESG (Environmental, Social, and Governance) information on their activities. In particular, the review would ensure that pension funds as well as all investors have access to adequate non-financial information from investee companies to be able to take account of sustainability-related risks, opportunities and impacts in their investment decisions, such as required by the new regulatory framework on sustainable finance.
The whole framework on sustainable finance needs to adopt a holistic approach. There are significant gaps between companies' current reporting and the information financial institutions need to be able to comply with the obligations imposed by the Sustainable Finance Disclosures Regulation (SFDR) as well as the Taxonomy Regulation.
- The mandatory indicators to be used under adverse impact due diligence under SFDR should be reported by companies and stored in a central European database.
- Geographical reach: The Taxonomy and SFDR apply to the entire portfolio, NFRD only to EU companies. How will pension funds as well as all investors achieve the necessary ESG data on their non-EU investments?
- Timing gap: The new disclosure requirements for investors will be implemented in March 2021 while the legislative process on the reporting requirements for companies has just started.
A common standard for non-financial corporate reporting would be very helpful to satisfy the needs and obligations of the financial sector and enable the allocation of private capital to sustainable companies. Any common European ESG reporting standard should incorporate the principles and content of existing standards and frameworks.
It is necessary to differentiate different types of companies and to discuss the approach EU legislation should take:
- Companies which are capital-market-oriented should be required to provide a set of core data points and additional information specific to their sector, reflecting the respective company’s material ESG topics.
- The inclusion of large private companies could be useful, as ESG data can be particularly problematic to get in private equity investments. It is also problematic that most private equity funds are domiciled outside the EU.
- Non-listed small companies should be subject to non-binding guidelines to avoid onerous administrative burden.
PensionsEurope welcomes the publication of the Final Report of the High-Level Forum on CMU “A new Vision for Europe’s capital markets”, as it sheds light on the importance of having effective capital markets and sustainable and adequate pensions. Pension funds need fully functioning and integrated capital markets to provide good pensions to their members and beneficiaries and this report includes many recommendations that could lead to steps towards an objective we strongly support: the realisation of the CMU. You can find our press release here
The recent regulatory developments in the context of the EU Sustainable Finance agenda create an urgent need for publicly available ESG data as well as how to enhance their sourcing. Compliance with the new disclosure obligations introduced by the sustainability disclosures Regulation requires financial market participants to have access to comparable robust and reliable ESG data at the level of companies. Unfortunately, the availability of quality, comparable, reliable and public ESG data is currently rather limited and insufficient to comply with the increasing expectations and new regulatory requirements due to apply shortly. For this reason, the 6 associations jointly call the EU to build and / or support, based on existing solutions, a centralised electronic open source EU ESG data register with the following characteristics:
- The data register should focus on ESG disclosure in line with NFRD, EU taxonomy based information, starting with climate change adaptation and mitigation objectives, as well as ESG data necessary to financial market participants to comply with the SFDR.
- The register should also include relevant ESG information already collected by European and national institutions such as governments, central banks, statistical bodies, etc.
- Such data should be gathered and made available digitally to users of non-financial information, not only investors, but also lenders, academia, researchers, authorities and others.
You can read the joint letter here.
PensionsEurope today published a statement on the Covid-19 Crisis 2020. You can read it here.